Upstart Stock Shows Signs of Recovery and Growth Potential

Upstart's stock price has stabilized at $59 after a wild ride, showing potential for growth as interest rates decline. Investors may consider buying as Wall Street sets a $100 price target amid improved metrics.

Date: 12-01-2025

AI Rating: 6

Stock Price Recovery
Upstart (NASDAQ: UPST) has experienced significant fluctuations in its stock price, initially surging after its IPO to an all-time high of $390 before plummeting to a low of $12.40. Currently trading at $59, the stock shows signs of recovery fueled by a decline in interest rates and stabilization in its business metrics.

Revenue Growth
In the past few years, Upstart's revenue growth has been inconsistent. After a dramatic 264% growth in 2021, the company faced a decline of 1% in 2022 and 39% in 2023. However, the outlook is more positive for 2024, with analysts projecting a 17% increase in revenue to $599 million. Furthermore, from 2024 to 2026, a Compound Annual Growth Rate (CAGR) of 29% is expected, increasing revenue to around $995 million.

Adjusted EBITDA
Adjusted EBITDA margins have faced challenges, moving from 27% in 2021 to negative figures in 2022 and 2023, which reflects a decline in profitability amid rising interest rates. Positive trends in adjusted EBITDA are anticipated, with the third quarter of 2024 already showing a turnaround to a positive $1.4 million, forecasted to grow to approximately $5 million in the fourth quarter.

Conversion Rate and Contribution Margin
Upstart's conversion rate fell to 10% in 2023 after reaching 24% in 2021, but it is expected to bounce back as interest rates decline, thereby facilitating more loan approvals. The contribution margin has improved, reflecting the company's ability to maintain efficiency even as revenues were under pressure.

Debt and Valuation
With a high debt-to-equity ratio of 2.2, Upstart has taken measures to refinance its convertible debt, prolonging maturities and providing more time to navigate through adverse conditions until the market improves. The company's enterprise value of $5.8 billion is considered reasonable at 7 times next year’s sales, making it attractive yet slightly risky if valuations expand significantly.

Stocks: UPST