Upstart Stock Is a Buy Now and a Buy Later Investment

Few tech plays have been hit as hard by the latest tech wreck as Upstart (NASDAQ:UPST) stock.

The website for Upstart (UPST) is viewed through a magnifying glass focused on the company's logo.
Source: Postmodern Studio /

The fintech, which uses artificial intelligence to make lending decisions, was selling for $390 per share as recently as Oct. 15. UPST stock trades today at around $120.

It wasn’t news that sent the stock down. The latest quarterly report was great.

Revenue nearly quadrupled in the third quarter, to $228 million from $65 million a year earlier. Profits nearly tripled, from almost $10 million to nearly $30 million. Earnings per share tripled to 30 cents/share from 10 cents.

It was all good. But as inflation and interest rates began rising, the valuation looked out of whack.

Even after its fall Upstart still has a market cap of $9.37 billion, 11.6 times expected 2021 revenue.

A Closer Look at UPST Stock

If you’re worried about inflation, Upstart is a good reason why you shouldn’t.

Bankers are expensive. Upstart replaces them with AI software. The software can look at 1,000 potential variables, not just a credit score. Real bankers can’t do that.

The company says it can approve 173% more loans while keeping loss ratios constant.  Banks can’t do that.

Rather than becoming a bank, Upstart fueled its fast growth by offering the software to banks and credit unions, 31 at the end of the third quarter. The result is that its growth is profitable, and its runway to further growth is clear.

In addition to banks, Upstart is also getting revenue by selling its software and services to auto dealers.

The plan for 2022 is to go into home mortgages and to start serving underserved communities. But the focus remains the same, replacing expensive bankers with cheap software, cutting banking costs while increasing the number of loans they can handle profitably.

Why Shares Fell

No matter how great a tech company is, there is a price that’s too high. That’s what happened with UPST stock.

Analysts didn’t give up on it so much as back off a bit. Only one of the nine analysts covering it at Tipranks put out the sell light while the shares collapsed. Their average price target is $258, more than double the current price.

The question now is whether the move is overdone. Numbers are harder to boost as they grow bigger. Analysts expect 50% growth from UPST stock in 2022, but in 2021 the company tripled its revenue.

If it can hit estimates that’s $1.2 billion coming in, and you’re still paying almost 8 times that forward revenue at the stock’s current price.

The Bottom Line

There is nothing wrong with Upstart as a company.

The problem is the market. Fear has replaced greed. Money has been lost that isn’t coming back. The appetite for risk is down.

That means it’s a good time to look for an entry point into UPST stock. I personally think growth estimates for 2022 may be low.

Inflation means banks are looking to cut costs. The “great resignation” means they’re having trouble finding bankers. Both these factors should generate more interest in using software for decision-making.

Upstart may also be down to a price where a large bank, or larger fintech like Block (NASDAQ:SQ), might start to show interest. The sky was too high, but the floor is close to where the stock is trading now.

I say buy it.

On the date of publication, Dana Blankenhorn held no positions in any company mentioned in this story. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at, tweet him at @danablankenhorn.

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