For Upstart, It May Be Raining but Not Pouring

Shares of Upstart Holdings, Inc. (UPST) nosedived 45.5% in the extended trading session on Monday, marred by lower revenue guidance by the company. The share price declined despite better-than-expected first-quarter results reported by the company.

Upstart is an artificial intelligence-based (AI-based) lending platform that partners with banks and credit unions to provide affordable credit.

Detailed Results

Revenues during the quarter jumped a whopping 156% year-over-year to $310 million and outpaced analysts’ estimates of $300.3 million. The revenue boost came from a 170% rise in total fee revenue, which stood at $314 million.

Adjusted earnings came in at $0.61 per share, higher than analysts’ estimates of $0.54 per share. Also, the reported figure compares favorably with the earnings of $0.22 per share in the same quarter last year.

With bank partners originating 465,537 loans across its platform during the quarter, Upstart’s Transaction Volume advanced 174% to $4.5 billion. Conversion on rate requests stood at 21% in the first quarter, down from 22% in same quarter last year.

The contribution margin in the first quarter was 47%, compared to 48% in the year-ago quarter. Adjusted EBITDA came in at $62.6 million, up from $21 million in the first quarter of 2021.

Guidance

The Co-Founder and CEO of Upstart, Dave Girouard, said, “While this year is shaping up to be a challenging one for the economy, we know the drill and are confident that we can navigate whatever 2022 and beyond might hold.”

Thus, based on the current business momentum, Upstart has lowered its guidance for the Fiscal Year 2022. The company now expects revenue of about $1.25 billion, compared with the $1.4 billion guided previously. The consensus estimate is currently pegged at $1.4 billion. Also, the company projects a contribution margin of approximately 48%.

For the second quarter, UPST forecasts revenue to fall in the range of $295 million to $305 million against the consensus estimate of $334.8 million. Adjusted net income is expected to be between $28 and $30 million. The contribution margin is anticipated to be nearly 45%.

Stock Prediction

UPST has a Moderate Buy consensus rating based on eight Buys, three Holds and one Sell. Upstart’s average price target of $151.83 implies 96.9% upside potential to current levels. The stock has lost 12.6% over the past year. 

Website Traffic

With the help of TipRanks’ Website Traffic Tool, one can predict a company’s performance well ahead of its results. According to the tool, in the first quarter, the UPST website’s total projected worldwide visits rose 476.3% year-over-year, which is visible in the year-over-year growth witnessed in the revenues for the reported quarter.

Takeaway

The company has maintained the trend of delivering impressive quarterly performance. However, its poor Q2 and full-year 2022 outlook has shaken investors’ confidence in the stock. Given the persistent macro headwinds like soaring prices and rising interest rates, some impact is expected on Upstart’s performance.

Discover new investment ideas with data you can trust.

Related News:
Spire’s Q2 Results Fall Year-Over-Year but Surpass Estimates
Vale & Tesla Enter Long-Term Supply Deal
Cigna Exceeds Q1 Expectations & Issues Upbeat 2022 Outlook