Upstart Stock Drops Despite Q1 Beat: Analysts Highlight AI Progress, Warn Of Inflation Risks

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

On Tuesday, Upstart reported first-quarter earnings of 30 cents per share, which beat the analyst consensus estimate of 17 cents.

Quarterly revenue was $213.37 million. That’s up from $127.79 million in the same period last year. The company beat the consensus estimate of $199.49 million

Here are the key analysts’ takes on the stock:

• JPMorgan analyst Reginald L. Smith reiterated the Neutral rating on Upstart, lowering the price forecast from $79 to $64.
• Piper Sandler analyst Arvind Ramnani maintained the Overweight rating, with a price forecast of $69.

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

JPMorgan: The analyst writes Upstart is gaining momentum from a flywheel effect—stronger repayment data is enhancing its ability to detect risk and fraud, which in turn drives higher loan approval rates and boosts overall volume.

Smith highlighted that he sees significant potential in the company's AI-driven lending platform, particularly as the loan funding environment improves.

The analyst also highlights Upstart's increasingly stable capital structure, noting that over half of its originations are now supported by committed capital partners.

The analyst notes that Upstart is refining its underwriting models by using "embeddings," a technique from natural language processing, to better detect risk patterns.

Per Smith, the company will share more updates on its AI advancements during its Analyst Day next week.

Piper Sandler: The analyst notes that average loan sizes rose slightly due to more super prime borrowers.

Upstart slightly raised its full-year revenue outlook—mainly from interest income—and increased its EBITDA margin guidance by 100 basis points. While the forecast assumes stable economic conditions, management flagged rising uncertainty and inflation as key risks that could affect credit performance.

Despite meeting expectations on fee-based revenue, the analyst highlighted that stock fell results lag buyside hopes and concerns grow over macro risks and widening credit spreads.

Ramnani is modeling revenue growth of +58.9% in FY25 and +25.8% in FY26.

Price Action: UPST shares are trading lower by 10.29% to $45.86 at last check Wednesday.

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