Upstart has seen its stock skyrocket by almost 27% in pre-market trading following an impressive earnings report, so is it time to invest?
Feb. 16, 2022
Upstart (NASDAQ: UPST), the California-based AI lending platform, announced its fourth quarter and full-year 2021 earnings results last night, and what a performance from the firm.
The company impressed all around: topping expectations for earnings, providing an extremely positive outlook for the coming quarter and year, and announcing a new share-repurchase program.
Let’s dive in, shall we?
Upstart’s quarterly results
First, to the figures. Upstart reported earnings per share of $0.89 on revenue of $305 million for the quarter, far exceeding the respective $0.51 and $263 million expected by analysts. Revenue increased by 252% from the year-ago quarter in an impressive showing from the firm.
Things look equally rosy when we analyze the full-year earnings. Revenue again increased by triple-digits, with the $849 posted this year beating 2020’s number by 264%. A lot of this came from the company’s AI lending arm, with fee revenue accounting for $801 million of the total. However, CEO Dave Girouard was quick to point out that “auto loan originations on our platform are now ramping quickly and will provide growth opportunities to Upstart for years to come.”
With this in mind, Upstart forecasted revenue of $305 million at the high end for the next quarter and $1.4 billion for the full year 2022. These figures once again topped what analysts were expecting, with $258 million and $1.2 billion predicted respectively.
The company also announced a share-repurchase program that will see it buy up to $400 million of common stock. CFO Sanjay Datta outlined that the volatility of the stock has led to attractive buying opportunities, and that “our profitability puts us in a position to be able to initiate this program and take advantage of those situations on behalf of our shareholders.”
Should I buy Upstart stock?
Upstart is a prime example of a stock that has perhaps been oversold in the current rotation away from growth stocks. It’s currently down almost 25% this year alone and has effectively been sliding since it reached all-time highs in mid-November of last year. During this time very little has actually changed regarding Upstart’s underlying thesis. Instead, macroeconomic factors and fears around a volatile market have played havoc with growth stocks’ value.
Upstart maintains a first-mover advantage in a sector that has enormous growth potential. The practices around lending have been stagnant for decades, and Upstart’s AI-driven approach could impact the sector for years to come.
On top of this, expansion into the automotive market gives the company some much-needed diversity within its revenue stream. While that market is certainly more competitive, Upstart still has the capacity for considerable growth. It tripled its dealership footprint from 2020 to 2021, and the company remains bullish that it is only really getting started.
Continuing to display growth without any signs of stopping, Upstart remains a great addition to any well-rounded portfolio. While it’s certainly volatile, its upside will speak to long-term investors looking for a foothold in the financial sector of the future.