Upstart Analysts Await Further Clarity While Cheering Macro Credit Stabilization And AI As Potential Tailwind

Piper Sandler analyst Arvind Ramnani reiterated Upstart Holdings, Inc UPST with a Neutral and $16 price target.

Upstart’s 4Q results came ahead of muted expectations, with net revenues -7% driven by lower loan volume partially offset by larger loan sizes; margin upside, relative to consensus, was driven by reducing sales & marketing. 

The 1Q targets came in well below expectations. The management saw encouraging macro improvement, with personal savings rate improvement over the past three months and recovery in workforce participation. 

Finally, while generative AI, ChatGPT, and UPST’s application of AI are in entirely different categories, the broader attention of AI is serving as a marketing tool to elevate the role of AI applications. 

The analyst believes that UPST could see an increase in lending partners as its AI-based model gains broader acceptance. Ramnani remains optimistic about UPST in the longer term but remains Neutral pending improvement in the funding environment.

JMP analyst Andrew Boone maintained Market Perform, given that supply constraints limit revenue visibility. 

The analyst was incrementally positive coming out of the quarter as new catalysts are beginning to materialize as Upstart is in discussion for more permanent capital with multiple parties, and macro trends have stabilized over the past few months. 

While he materially reduced estimates, he believes this category can support 20%+ EBITDA margins at scale. Boone was positive following results, though he awaits more clarity on Upstart’s supply and profitability before upgrading shares.

The analyst appreciated the stabilization of the macro credit environment, its advanced talks with credit partners for permanent capital, and greater cost discipline following January’s 20% reduction in force. 

Mizuho analyst Dan Dolev maintained Underperform and a $16 price target. The 34K Q/Q loan decline was significantly less alarming than the 3Q-2Q and 2Q-1Q declines. 

However, the steepening Y/Y declines in loans may juxtapose potential positive signals. Dolev expected a mixed stock reaction as a poor guide might ignite hopes of better-than-feared outcomes.

Price Action: UPST shares traded higher by 21% at $20.38 on the last check Wednesday.