Upstart Share Price Forecast March 2022 – Time to Buy UPST?
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Shares of AI-based lending platform Upstart (NASDAQ: UPST) are in the red today, after closing at $103.77 as of March 25th (19:59 EST). Upstart shares were up by more than 1900% at their peak compared to its 2020 IPO. However, Upstart shares are now down by 68%. Many investors are wondering whether this will provide a buying opportunity.
Upstart – Technical Analysis
Upstart’s financial statement indicates a market cap of $8.723 billion with total assets worth $1.82 billion. Revenue for 2021 is at $848.59 million with a profit margin of 15.96% compared to $233.42 million in 2020.
Moving averages such as Exponential Moving Average (10)(115.25), Simple Moving Average (10)( 112.68), Exponential Moving Average (20)(116.98), Simple Moving Average (20)(120.99) and Exponential Moving Average (30)(118.46) are indicating a sell action. On the other hand, Relative Strength Index (14)(43.49), Stochastic %K (14, 3, 3)(49.98), Commodity Channel Index (20)(−71.82) and Average Directional Index (14)(15.08) are neutral.
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Recent Developments
Upstart uses AI for its lending efforts and has built an in-house credit lending model, a vast improvement over the traditional methods like a credit score. The company then partners with banks that can use the AI model to evaluate borrowers. As a result, the company acts as a digital layer between the borrower and lender. It earns a fee facilitating the transaction when one of its partner banks makes a loan using the platform.
Upstart’s partner institutions originated 1.3 million loans totalling $11.8 billion in volume in 2021. This represented a 338% increase from the previous year. Volume translated to $801 million in fee revenue , which has increased 251%. The company’s total revenue is $849 million for the year, representing a 264% increase from the previous year. Adoption among its banking partners is increasing, with strong growth expected for the years to come.
However, the biggest business of Upstart is still current personal loans, which make up the smallest part of the U.S. consumer loan market with $96 billion in volume a year. The company has thus decided to move aggressively into automotive loans, which account for $727 billion in volume a year, to grow its total addressable market. The company had grown its dealership partners to 410 by the end of 2021 compared to only 111 at the end of the year before. In 2022, Upstart’s management aims to hit $1.5 billion in auto-financing alone. Investors can expect some growth drivers for the next 5 to 6 years.
Should You Buy UPST Shares?
Investors aren’t surprised that Upstart has grown so quickly, especially considering that the company generated $141 million in operating income, giving it a 16.6% operating margin. The company has an asset-light model and has a small number of loans sitting on its balance sheet. Investors can thus expect margins to increase, even as the growth slows.
Upstart’s management is guiding for $1.4 billion in revenue in the coming year. However, investors should be concerned about inflated current sales and earnings multiples. The company has several things going for it, such as its asset-light model with strong profit potential, and the large addressable market between consumer and auto loans. All things considered, it is not too late to buy Upstart shares. Considering the management vision, its AI model and the potential volume growth now is the right time to take a position in the company.
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