Upstart Holdings Inc. has had a rough few years, but now things look like they are getting better, and Wall Street has taken notice.
The AI lending company was a market hit in late 2021, with its stock closing as high as $390. This was because Upstart UPST46.02% saw a huge demand for its personal loan goods. But in the years that followed, higher interest rates and problems getting money hurt the number of loans, and shares fell from their highs.
Their stock is still a long way from those highs. The stock’s price near $77 shows how far away it is from where it was in the good old days, even after rising 38% in the morning on Friday.
At the same time, though, investors and experts like the name more. Even though mood changed a lot in the second quarter, it’s still getting better in the third quarter, Mizuho’s Dan Dolev wrote after the company’s earnings report on Thursday afternoon.
Dolev says that there were many good things in that study. In this case, Upstart saw a 43% increase in loan volumes from one quarter to the next and gave positive quarterly forecasts.
“All of this is paired with a positive tone about the effects of [Upstart’s] AI models, rates that are going down even more, and the likely more business-friendly Trump administration,” Dolev wrote.
Upstart’s reading about the state of the economy as a whole also gave him hope.
People in charge said something interesting: “Americans did enjoy a surge of disposable income entering 2024 that provided some support for the ongoing spend levels as well as some welcome breathing room and savings rates.” This is what Dolev wrote. “We didn’t expect this to be this good.”
In a report on Friday, he raised his goal price from $48 to $90. He kept the outperform rating the same.
The stock went from being neutral overnight to overweight by Arvind Ramnani of Piper Sandler.
He wrote that the company is getting the new rating because of “a more accommodating rate environment, better lending dynamics, and upgrades to its lending model.” It’s important to note that the bank’s strong performance in the third quarter was mainly due to better loan practices and lower interest rates.
Ramnani is optimistic about the company’s funding, which includes a deal to work together with Blue Owl. He wrote that Upstart “now has over half of its loan funding from committed capital, which in our view introduces a degree of stability to its business model.” He raised his target price from $31 to $85 for the stock.
As rates go down and credit stays strong, Kyle Peterson of Needham agreed that “the tide seems to be shifting in [Upstart’s] favor.”
He wasn’t ready to become a bullish on shares, though. “Studying the shares for now because they went up about 20% after business hours, we will wait for a better entry point,” he wrote.
Peterson says that the stock should be held.
