Upstart (NASDAQ:UPST) stock is up 20% today after one BTIG analyst raised his price target on the artificial intelligence (AI) powered lending platform. The analyst raised his target from $42 to $72 per share while maintaining a “buy” rating. This represents roughly 14% upside from Upstart stock’s current price of about $63 per share.
What’s behind today’s generous upgrade?
Well, according to BTIG analyst Lance Jessurun, Upstart’s web-traffic data suggests that the company is preparing to report a “strong top-line beat” for the second quarter. Jessurun estimates that Upstart will report roughly $145 million in revenue in its most recent quarter. That would heartily surpass previous guidance and consensus estimates for about $135 million.
This is likely what has justified Jessurun’s daring price target — and daring it is. Indeed, UPST stock opened trading today for just $55 per share. This means that the analyst’s $72 target represented more than 30% upside potential this morning.
Many investors are likely reasonably surprised by this optimistic new assessment, given UPST’s roughly 90% decline in 2022.
“While we acknowledge that there are valid, lingering questions investors will continue to have on deal economics and terminal value, it is tough to see a downside catalyst that will bring the name back to the ~$10-20 range, especially into what looks like a strong quarter,” Jessurun wrote.
UPST Stock Soars Amidst Changing Sentiments
Interestingly, this isn’t Jessurun’s only recent bullish take on UPST stock. Earlier in June, the analyst said that the “bear thesis” surrounding Upstart is quickly evaporating while “longer-term opportunity is materializing.”
If you recall, UPST stock enjoyed a historically strong 2021 before rising interest rates crushed demand for loans, hindering Upstart’s AI-fueled lending.
“Our analysis on the last two years of Upstart has shown that they underestimated risk of the underlying loans (APRs weren’t high enough), while the macro factor included in the model was not calibrated appropriately to the rising rates and credit challenges,” Jessurun noted in June.
This has clearly changed, however. The company seems to be adapting to the tighter macroeconomic environment — a change the analyst has been quick to point out.
“Upstart seems to have adjusted well after a period of missing target cash flows, and credit now seems to be trending better than lending-partner expectations, and Upstart’s reserve recommendations are trending very conservatively.”
UPST stock is up a jaw-dropping 400% so far in 2023 as one of the biggest winners of this year’s AI wave.
On the date of publication, Shrey Dua 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.
