Shares of the financial technology company Upstart (NASDAQ:UPST) have crashed recently, trading in the $32 range after closing at over $72 on August 1. According to Wall Street analysts, despite the significant correction in its price, now might not be the right time to buy UPST stock.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
But before we dig deeper, let’s understand the factors that led to a sharp pullback in UPST stock.
Upstart’s Guidance Irked Investors
Up until recently, Upstart was among the top-performing stocks of the year. Its strong Q1 performance and long-term funding arrangement drove its share price higher. Last week, UPST delivered better-than-expected second-quarter earnings. However, its Q3 revenue forecast came below analysts’ expectations, leading investors to dump the stock.
For the third quarter, Upstart expects to deliver total revenues of approximately $140 million. In comparison, analysts expected the company to post revenues of $155.4 million.
Commenting on the revenue outlook, David Chiaverini of Wedbush said that the guidance reflects “a challenging secondary market for unsecured personal loans.” The analyst reiterated a Sell recommendation on UPST stock following the Q2 earnings results.
Along with Chiaverini, several analysts reiterated a Sell rating on Upstart stock.
Analysts Maintain a Bearish Outlook
Five analysts, including Chiaverini, maintained a Sell rating on Upstart stock following its Q2 results on August 8.
Goldman Sachs analyst Mike Ng reiterated a Sell on Upstart stock on August 8. The analyst said that the slow recovery in the broader funding market and borrower delinquency trends would weigh on new loan originations and hurt the net interest income of Upstart.
Meanwhile, Dan Dolev of Mizuho Securities lowered his Fiscal 2023 revenue outlook for the company. He reiterated a Sell on Upstart stock on August 11.
What is the Price Target for UPST Stock?
Upstart stock has received one Buy, six Hold, and seven Sell recommendations for a Moderate Sell consensus rating. Based on analysts’ consensus rating, UPST is not a good stock to buy. Further, the average UPST stock price target of $28.75 implies 12.3% downside potential at current levels.
The Takeaway
Upstart is poised to grow rapidly and profitably as the economy improves. However, the near-term pressure on its net interest income due to lower loan originations remains a drag. Further, analysts’ Moderate Sell recommendation and projected downside potential support its bear case.
