Upstart (NASDAQ:UPST) stock is trading lower today after the company announced that it had eliminated 140 hourly jobs. The artificial intelligence (AI) lending platform attributed the cuts to “the challenging economy and reduction in the volume of loans on our platform.” With rising interest rates and a potential 75 basis points hike in store tomorrow during the Federal Open Market Committee (FOMC) meeting, customers and businesses have been less incentivized to borrow.
Last week, Upstart received certification as a Honda (NYSE:HMC) Digital Solutions (HDS) partner. The certification will allow Honda dealers to offer Upstart’s Auto Retail software to customers, which provides a simplified buying process and an integrated workflow. Upstart Auto Retail General Manager Michia Rohrssen added the following about the news:
“Honda has always had some of the most loyal customers, and our digital retail platform will enable Honda dealers to provide a best-in-class purchasing experience and boost sales.”
Meanwhile, lending competitor SoFi (NASDAQ:SOFI) also reported impressive third-quarter earnings today, offering a preview for when Upstart reports earnings on Nov. 8 after the market close. Let’s get into the details.
Why Is UPST Stock in the Spotlight Today?
SoFi reported Q3 revenue of $424 million, up 56 year-over-year (YOY), with adjusted EBITDA tallying in at $44 million, up 332% YOY. In addition, the company also added almost 424,000 new customers.
SoFi’s bank charter has had a significant effect on company operations. Deposits totaled $5 billion, up 86% YOY, while new direct deposit account customers during Q3 had a median FICO score of 750. Furthermore, total origination volume increased 2% to $3.48 billion. That was driven by personal loan volume of $2.8 billion in particular, up 71% YOY.
For Upstart’s earnings, analysts expect revenue of $169.42 million and an EPS loss of 8 cents. A year ago, the company reported revenue of $228 million and EPS of 30 cents. Both metrics are expected to decline significantly this quarter. However, with UPST stock down more than 80% year-to-date (YTD), the big question is whether that has already been priced in.
In August, Upstart disclosed a credit performance FAQ. CFO Sanjay Datta sought to reassure investors by explaining the following:
“Our model today includes a healthy accommodation for economic degradation in the coming months, consistent with high inflation, fear of recession, and an increase in unemployment. Specifically, our model has been calibrated for an economy in the next two years that will be significantly worse than the 2014 – 2019 period.”
For Q4, analysts forecast revenue of $185.33 million and EPS of 11 cents. That would bring full-year revenue and EPS to $895.07 million and 70 cents, respectively.
On the date of publication, Eddie Pan did not hold (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.
