Upstart (NASDAQ:UPST) stock is down 20% after the financial technology (fintech) company issued preliminary earnings results. It warned that it likely won’t be able to meet its previous forecasts.
Upstart, which operates an artificial intelligence lending platform, issued second-quarter financial results that fell far short of its previous forecasts, putting downward pressure on its share price.
Prior to today, UPST stock had declined 77% this year.
What Happened With UPST Stock
In a corporate statement, Upstart said that its Q2 revenue will amount to $228 million, down from previous guidance of $295 million to $305 million. The company’s net loss is now expected to come in a range of $27 million to $31 million, much worse than previous guidance for break even. Upstart is expected to deliver final second-quarter results on Aug. 8.
The San Mateo, California-based company blamed the poor results on inflation and growing fears of an economic recession. Dave Girouard, co-founder and chief executive of Upstart, said in the statement that “Inflation and recession fears have driven interest rates up and put banks and capital markets on cautious footing.”
Why It Matters
The worse-than-expected financial results call into question Upstart’s operations and leadership team. They also play into the narrative this year that unprofitable, high-growth technology companies are dangerous in an inflationary environment. Investors have been fleeing from tech stocks in droves and putting their capital in more stable, blue-chip companies.
Several other fintech companies have been hit hard in the current market, including major players such as PayPal (NASDAQ:PYPL) and Affirm (NASDAQ:AFRM), each of which has seen their share price fall more than 60% year to date. The bad financial news from Upstart is going to push its share price even lower in coming days and weeks.
What’s Next for Upstart
UPST stock takes a big hit today on reports of a deteriorating financial position. It will likely take a long time for the unprofitable company to recover and regain the confidence of investors and analysts following its big Q2 earnings miss. And the final numbers the company reports in August could be even worse. Investors should stay clear of Upstart given its current problems.
On the date of publication, Joel Baglole 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.
