On Wednesday, Citi revised its stance on Upstart (NASDAQ:UPST) Holdings Inc (NASDAQ:UPST) stock, upgrading it from Sell to Neutral. Accompanying this shift in rating, the firm also raised the price target to $33.00 from the previous $15.00.
The analyst cited several factors for this change, including an improving conversion ratio and a decline in Unused Marketing Investment (UMI). Moreover, a more positive outlook for second-half fee revenue and a 45% reduction in Core Personal contributed to the upgraded assessment.
The return of "at will" partners, confidence in securing a new asset-backed security (ABS) deal, and over half of funding being under contract were also highlighted as positive indicators.
Additionally, the competition among lenders for rates and the potential impact of the anticipated Federal Reserve Pivot were taken into account. The progress in Upstart's artificial intelligence capabilities was another element that played a role in the revised outlook.
The analyst acknowledged that the current cycle for Upstart's stock is likely to be more gradual compared to its previous volatile swings, which saw the stock price move from $20 to $400 and back to $20 within an 18-month period.
While there are still high levels of Unused Marketing Investment and mixed signals from the broader consumer finance sector, as well as uncertain economic indicators, the analyst believes that the downside risks are now harder to justify. The firm prefers to await further evidence of sustained trends before adopting a more constructive position on the stock.
In other recent news, online brokerages Futu Holdings (NASDAQ:FUTU) and UP Fintech Holding have suspended night trading of U.S. stocks due to increased global market volatility. The decision was prompted by notifications from Blue Ocean, a provider of infrastructure for off-hours U.S. stock trading.
Meanwhile, Upstart Holdings Inc . has seen significant changes in analysts' views. Mizuho Securities upgraded Upstart from Underperform to Outperform, citing improving credit conditions.
However, BTIG initiated coverage on Upstart with a 'Sell' rating, expressing concerns about the company's competitiveness in the credit underwriting market.
In the lending sector, Castlelake, a private credit lender, has agreed to purchase consumer installment loans worth up to $1.2 billion from Upstart.
This agreement follows a previous deal in which Castlelake acquired $4 billion in loans from Upstart, marking a strategic partnership between the two firms. These recent developments highlight investment firms' increasing ventures into areas traditionally occupied by banks.
Lastly, Upstart's Q1 2024 earnings report revealed revenues of $138 million from fees, net revenue of $128 million, and operating expenses of $195 million. The company anticipates Q2 2024 revenues of approximately $125 million and expects positive EBITDA by year-end. Amidst these changes, Upstart has introduced new loan products and an AI certification program for bank executives.
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