On Thursday, BofA Securities reinstated coverage of Upstart (NASDAQ:UPST) Holdings Inc (NASDAQ:UPST), a personal loan marketplace, assigning it an Underperform rating with a new price target of $22.00. The financial institution cited significant challenges the company faces in rebuilding investor and lender trust. Upstart's loan origination numbers have seen a considerable decline since 2022, and the company has been increasingly reliant on its own balance sheet to fund loans.
BofA Securities highlighted three major areas of concern for Upstart: the strength of its artificial intelligence moat, the rate at which loan originations may recover, and the sustainability of its funding model. These debates are expected to continue for some time before reaching a resolution.
The analyst pointed out that Upstart's stock is currently trading at a premium—4.1 times its projected 2025 consensus revenues—compared to its peers, which trade at approximately 1.9 times their estimated 2025 revenues. This valuation suggests that the stock is priced expensively relative to the market.
The price target adjustment reflects a cautious outlook on the company's ability to address the outlined issues. Upstart's performance and its approach to funding will be closely watched by investors as it attempts to navigate through the challenges and regain confidence in the market.
The new price target of $22.00 represents a significant shift from the company's previous valuation, indicating a more bearish stance from BofA Securities on the future prospects of Upstart Holdings Inc .
InvestingPro Insights
In light of BofA Securities' recent underperform rating for Upstart Holdings Inc (NASDAQ:UPST), real-time data and insights from InvestingPro further illuminate the company's financial landscape. Upstart's market capitalization currently stands at approximately $2.27 billion, reflecting the market's valuation of the company. The negative P/E ratio of around -9.46 suggests that investors are pricing in the lack of profitability in the near term, as the company has not been profitable over the last twelve months. Moreover, the company's stock price has exhibited significant volatility, with a 63.6% return over the last year, yet a 22.56% decline over the last three months, indicating a potentially higher risk profile for investors.
Two critical InvestingPro Tips for Upstart include the observation that analysts have revised their earnings expectations downwards for the upcoming period, and the company's stock generally trades with high price volatility. These insights align with the concerns raised by BofA Securities regarding the sustainability of Upstart's business model and the challenges it faces in the market.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available that can provide further guidance on Upstart's financial health and market performance. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the comprehensive insights that InvestingPro has to offer.
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