Upstart Has 35% Upside if This Analyst Is Right

In this photo illustration the Upstart (UPST) logo seen displayed on a smartphone screen

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Investors tend to rely on expert opinions before jumping into a given stock. Accordingly, when analysts initiate coverage of said stock, investors tend to take notice. Such is the case with Upstart Holdings (NASDAQ:UPST) today. Shares of UPST Stock underperformed along with the broader market. In fact, today was a bloodbath for high-growth companies like Upstart, as investors priced in additional worries about interest rate hikes. Recently-released minutes from the latest Federal Open Market Committee (FOMC) meeting indicated rate hikes could be coming much more aggressively.

For high-growth tech stocks like Upstart that are expected to have the majority of their earnings come in later, higher interest rates by definition hurt the valuation of these stocks. That is because investors are forced to discount future earnings at a higher rate. This tends to lead to valuation compression, which isn’t good for expensive stocks. That said, let’s take a look at the bright side with Upstart. It is not all doom and gloom in today’s market for this artificial intelligence lending stock.

Today, Loop Capital initiated coverage of Upstart, providing a $140 price target along with a Buy rating. This rating is a divergence from the last two analyst reports on this stock, which weren’t as positive. Loop Capital focused on Upstart’s business model as a key reason to own this stock long-term. Various competitive advantages, including the company’s customer funnel and matching potential, has led Loop to believe Upstart could be the type of asset-light investment long-term growth investors want to own right now. To boot, this stock is down significantly from its highs, implying a reversion toward some higher level makes sense.

Personally, I like Upstart’s business model and growth prospects over the long-term. That said, this macroenvironment is certainly not friendly to growth investors. Accordingly, it appears to be an “invest at your own risk” type of market right now, especially when it comes to UPST stock.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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