Macro-economically speaking, the U.S. economy has found itself in a situation of immense liquidity, following the government’s sequential COVID-19 stimulus packages. This kind of scenario is typically characterized by low interest rates, thus individuals are more apt to use their credit for riskier assets and ventures. Today’s fiscal conditions have provided a supportive environment for businesses running credit scoring and lending schemes, such as Upstart Holdings, Inc. (UPST). Upstart reported earnings earlier this week, smashing estimates in nearly every sector. (See Upstart stock charts on TipRanks)
Detailing a bullish hypothesis on the stock is John Hecht of the Jefferies Group, who believes that “UPST’s cloud-based, AI lending platform results in a superior credit product w/ attractive unit economics for both consumers and lenders, a ‘win-win’ for both participants.”
Hecht assigned a Buy rating on the stock, and decided on a price target of $160, a significant raise from his previous at $101. This target currently represents a potential 12-month downside of 12.65%, although it is important to note the stock jumped 26.18% yesterday following the good news.
Upstart reported earnings per share of $0.62, smashing Wall Street consensus estimates of $0.25. Revenues topped Jefferies’ own estimates by 26%, and the company raised its FY21 outlook as well.
Fueled by strong loan volume, Upstart has continually seen growth since its December 2020 IPO. Hecht added that increases in operating expenses were in line with expectations, and are understandable given the company’s investments in sales and marketing.
In addition to raised guidance, Hecht wrote that Upstart management expressed future possibilities for monetization and “progress surrounding the auto roll-out and Prodigy.” Prodigy being the auto financing software company that Upstart acquired in late-March of FY21.
Hecht is encouraged by Upstart’s “asset-light” and low-regulatory risk platform, as well as the $3 trillion total market which it is targeting.
On TipRanks, UPST has an analyst rating consensus of Strong Buy, based on 5 Buy ratings. The average Upstart price target is $178.60, reflecting a potential 12-month downside of .22%. On Thursday at 10:14 a.m. EST, UPST traded at a price of $179.54 per share.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
