Upstart Is A Good Fit For Fintech Growth Investors, Analyst Says

Upstart Holdings, Inc. UPST shares are trading higher on Wednesday.

The company reported fourth-quarter results yesterday, with total revenue up 56% year-over-year.

Total fee revenue increased 30% on a year-over-year basis. Upstart said it originated 245,663 loans in the quarter, up 68% year-over-year.

Here are the analysts’ take on the stock:

• Piper Sandler analyst Arvind Ramnani reiterated the Overweight rating on the stock, raising the price forecast to $105 from $85.
• JP Morgan analyst Reginald L. Smith upgraded Upstart to Neutral from Underweight, increasing the price forecast to $79 from $57.
• Needham analyst Kyle Peterson reiterated the Buy rating on Upstart, raising the price forecast to $108 from $100.

Piper Sandler: Per Ramnani, revenue growth was driven by higher conversion and approval rates, thanks to better model accuracy, lower UMI, and moderating default rates.

This led to lower rates for borrowers and improved margins.

The company expects 2025 revenue of $1 billion, a 57.1% increase, well above the consensus estimates.

The analyst notes that growth will be driven by better modeling and conversion, with potential upside from new partnerships like Blue Owl.

However, the 2025 target assumes a stable macroeconomic environment with no rate cuts.

The analyst revised the 2026 revenue estimate to $1.26 billion, up from the previous 2025 estimate of $790 million.

Ramnani projects revenue growth of 57.3% in 2025 and 25.9% in 2026.

JP Morgan: Smith writes the company’s model improvements could boost conversions and transaction volume, unlocking more operating leverage. The analyst is optimistic about conversion rate improvement in 2025, which could lead to upside in FY25 revenue and adjusted EBITDA guidance.

The analyst noted that the underlying business trends are as strong as they’ve been in the past three years.

The analyst notes that while Upstart’s model enhancements are expanding the credit box and potentially increasing operating leverage (like better marketing spend yield), they also introduce additional risks, particularly through co-investment and loss-sharing agreements with financing partners.

In a worst-case scenario, Upstart could face over $400 million in losses from these agreements, which would be enough to wipe out its 2025 EBITDA, Smith cautions.

However, the analyst points out that Upstart’s UMI, which measures the macroeconomic impact on credit losses, has improved by more than 20% in the last six months and reached its lowest point since late 2022 in December, which is seen as a positive sign.

Needham: The analyst mentions that despite shares being up around 25% after hours, Peterson still considers the stock a strong option for FinTech growth investors.

This is due to its accelerating growth, a strong new product pipeline, and a larger, more diversified funding base, which provides more visibility into the business model while keeping the balance sheet light.

Price Action: UPST shares are trading higher by 31.3% to $88.42 at last check Wednesday.

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