Upstart Stock Surge: Can Lower Rates Ensure a Turnaround?

The latest report indicates Upstart's stock surged 30% in October due to lower interest rates. However, after facing revenue declines, analysts expect a challenging path ahead, though optimism is building for a potential recovery in the coming years.

Date: 04-11-2024

AI Rating: 5

Upstart's stock performance has shown significant volatility, highlighted by a 30% gain in October following the Federal Reserve's first interest rate cut in four years. This change in interest rates could potentially boost demand for Upstart's credit evaluation services, particularly as lenders become more comfortable with lower default risks.

The report notes that Upstart has faced declining revenues for six consecutive quarters, which has affected investor confidence. Although there was a year-over-year revenue increase in the first quarter of 2024, the second quarter reported another decline. However, management's guidance calls for an 11% revenue increase in the upcoming third quarter, presenting a potential uplift for investors.

In terms of profitability, Upstart has been struggling with net losses throughout this period, with expectations of a $0.66 loss per share in 2024. The anticipated turnaround is projected for the following year, where earnings per share might hit $0.26. This shift could represent a significant improvement in Upstart’s financial trajectory, potentially restoring investor faith.

Despite the challenges posed by high-interest rates leading to increased default rates and cautious lending practices, the report suggests an optimistic outlook if interest rates continue to decrease. Investors are advised to consider Upstart's position as potentially lucrative over a longer horizon, notwithstanding its volatile nature.

Stocks: UPST