Is Upstart a buy?

It’s time to talk about a new name to the market. Here is the breakdown on $UPST, otherwise known as Upstart.

Current Price: $56.00

52/Wk High: $69.48

52/Wk Low: $22.61

Market Cap: $4.1 Billion

Read below for the breakdown!

Upstart ($UPST) is an artificial intelligence lending platform that not only improves consumer’s access to affordable credit but reduces risks and costs for Upstarts lending bank partners.

Upstart recently went public, skyrocketing on its IPO a whopping 47%, much higher than its original pricing range of $20/share to $22/share.

The company is led by CEO Dave Girouard, who use to lead Google’s enterprise department. Even more impressive, according to Upstart 69% of all loans through the platform are fully automated through their AI system.

For comparison, Upstarts systems are the best in the game with 75% fewer defaults when running at the same approval rate as major US banks.

Digging into the numbers Upstarts numbers are not bad. According to Upstarts prospectus, 98% of the company’s revenues come from fees.

On the downside, Upstart currently only maintains 10 banking partners and relies on just a few for the majority of their business. In fact, Cross River Bank accounts for a huge 72% of loans through the Upstart platforms, which could represent a moderate risk.

Taking a look at Upstarts financials the company reported revenues of $146.706 million for the 9 months ended in September of 2020. The most recent revenues total represents growth and is much better than the 9 months ended in September of 2019 revenues level of $101.617 million.

As for net income, Upstart recently turned positive, reporting a net income level for the 9 months ended in September of $4.956 million, much better than the same time 2019 level of $-6.517 million.

Given the improvements, it’s not surprising to see that total operating expenses increased as well to $145.334 million for the 9 months ended in September, higher than the same time 2019 level of $109.708 million.

Shifting into the balance sheet, the numbers could see improvement.

Total Debt: $107.937 Million

Total Liabilities: $194.591 Million

Total Assets: $309.804 Million

Cash & Short Term Inv: $53.234 Million

While the numbers are solid, the valuation is very high.

Price to Earnings: 411.32x

Price to Sales: 22.05x

Price to Cash Flow: 110.12x

Given the numbers, the analysts are bullish with a mean price target of $59.20/share, representing a 5.71% gain.

It is also important to note that the high price target is $66.00/share, representing a 17.86% gain, while the low price target is $55.00/share, representing a -1.79% loss.

The big money is not as involved with just 33.16% of Upstart being owned by institutions. Top holders include Third Point, Stone Ridge Asset Management, and First Round Capital.

On a technical basis, Upstart has been bullish but could be flashing opportunity. According to the six-month charts, Upwork has started to pull back, with an RSI of 65.60 and CCI of 89.68.

In short, Upstart is a solid company that could see strong growth in coming years but after a monster jump off its IPO waiting for a pullback in the stock to buy-in for the long term seems to be a favorable decision.

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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.