More Downside For Upstart Stock?
Upstart Holdings (NASDAQ: UPST), the AI-driven lending platform, has witnessed another sharp stock drop, falling over 55% from February highs of nearly $90 to under $40 currently. For shareholders, this turbulent ride is all too familiar—echoing the company's staggering 96% plunge during the 2022 inflation shock. If you're seeking upside with lower volatility than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and delivered over 91% returns since inception.
Trefis
Upstart's main business model—linking borrowers and lenders via its AI platform—faces a significant hurdle: its vulnerability to interest rate shifts. Higher rates typically reduce loan demand, thereby impacting revenue.
This sensitivity has shown up in the company's recent financial results:
Evaluating Upstart's financial health offers a mixed view:
Several external risks weigh on Upstart's near-term outlook:
At a price-to-sales ratio of 5.5x, Upstart trades above the S&P 500's 2.8x, though it's consistent with its three-year average. This suggests that investors are still expecting significant growth despite headwinds.
Though the stock is far below its recent highs, caution is advised. A combination of macro uncertainty, lack of profitability, and a relatively high valuation leaves limited margin for error.
Recent revenue growth shows that Upstart's AI lending model can thrive in low-rate environments, but the business remains highly exposed to broader economic cycles and credit market disruptions.
For investors, the key question isn't whether Upstart can grow in ideal conditions—it clearly can—but whether it can build the resilience to withstand downturns without the extreme volatility seen in its stock.
Holding on to a declining stock is never easy. Trefis collaborates with Empirical Asset Management—a Boston-based wealth manager whose strategies produced gains even during the 2008-09 crisis when the S&P 500 fell over 40%.
Empirical uses the Trefis HQ Portfolio in this asset allocation framework to help clients achieve better returns with lower risk, as evidenced by the HQ Portfolio performance metrics.
Investors hoping for a soft landing may wonder—how bad could it get in a downturn? Compare the last six market crashes here.
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