Friday, BTIG began coverage on Upstart (NASDAQ:UPST) Holdings Inc (NASDAQ:UPST) stock with a Sell rating, setting a price target of $14.00. The firm expressed concerns about the company’s position in the competitive credit underwriting market.
BTIG's analysis suggests that Upstart has not shown a significant advantage in credit underwriting compared to its traditional installment lending peers.
According to BTIG, the lack of a distinct edge in underwriting leads to loans that may be mispriced and an operational scale that falls short of its competitors.
These factors contribute to the challenges Upstart faces in achieving favorable rates of return. The firm indicated that without subsidizing loans, Upstart could be at a disadvantage as competitors price their loans more effectively.
The analyst's statement highlighted the difficulties for Upstart in standing out within a field of established lenders. The company's strategy and infrastructure were put into question regarding their effectiveness and scalability when juxtaposed with the offerings from other market participants.
The Sell rating comes as a stark assessment of Upstart's potential to generate returns under current market conditions. BTIG's stance reflects skepticism about the company's ability to compete without engaging in loan subsidization, which could potentially lead to adverse selection against Upstart.
The new price target of $14.00 represents BTIG's valuation of Upstart's stock based on their analysis. This assessment will likely be of interest to investors as they consider the viability and future performance of Upstart in the competitive lending market.
In other recent news, Upstart Holdings Inc . experienced significant developments. The company's Q1 2024 earnings report revealed revenues of $138 million from fees, net revenue of $128 million, and operating expenses of $195 million. Upstart anticipates Q2 2024 revenues of approximately $125 million and expects positive EBITDA by year-end.
Other recent developments include an upgrade from Redburn-Atlantic, moving Upstart from a Sell to a Neutral rating. This change was influenced by advancements in product innovation and balance sheet strength, as well as new revenue guidance for the second half of 2024.
However, Mizuho Securities reduced its price target for Upstart from $23 to $17, maintaining the existing rating. This adjustment followed a quarter-over-quarter decline in loan growth and increasing delinquencies. The firm also revised its full-year 2024 sales expectations for Upstart, reducing them by approximately 17%.
In the midst of these changes, Upstart launched new loan products, including the auto-secured personal loan pilot and Upstart HELOCs. The company also introduced an AI certification program for bank executives. These are the recent developments in the company's journey.
InvestingPro Insights
Amid concerns about Upstart's competitive edge in the credit underwriting market, recent data from InvestingPro could provide investors with a broader perspective on the company's financial health and market position. Upstart's market capitalization stands at $2.36 billion, reflecting investor sentiment and market reach. However, the company's P/E ratio is currently negative at -12.83, indicating that investors are not expecting earnings growth in the near term. This aligns with the sentiment from analysts who have revised their earnings downwards for the upcoming period, suggesting caution in the short-term outlook.
Despite these challenges, Upstart has shown a significant return over the last week, with an 8.7% price total return, hinting at a potential rebound or positive investor reaction to recent developments. This volatility is something investors may want to monitor, as it could indicate future price movements. Moreover, with a gross profit margin of 74.13% over the last twelve months as of Q1 2024, Upstart demonstrates the ability to maintain a high level of profitability on its revenues, which could be a positive sign for operational efficiency.
Investors considering Upstart's stock should note that the company does not pay dividends, which could influence investment decisions for those seeking regular income streams. For a deeper dive into Upstart's financials and additional strategic insights, interested individuals can explore the full range of InvestingPro Tips. There are currently 6 more tips available, which can be accessed with a special offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/UPST.
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