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The company expects revenues of approximately $150 million for the quarter. The Zacks Consensus Estimate is currently pegged at $149.9 million, suggesting an improvement of 11.4% year over year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The consensus mark for earnings is pegged at a loss of 14 cents per share, wider than the year-ago quarter’s reported loss of 5 cents. The loss per share estimate has narrowed by a penny over the past 60 days.
Image Source: Zacks Investment Research
UPST’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, the average surprise being 12.1%.
Our proven model does not conclusively predict an earnings beat for Upstart this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
UPST has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors to Influence Upstart’s Q3 Results
Upstart’s third-quarter performance is likely to have gained from its strategy to operate as a multiproduct company. Innovative product launches like the Upstart Macro Index and features like Parallel Timing Curve Calibration and Recognized Customer Personalization to promote improved data-driven decisions among lenders are likely to have favored the company’s performance.
UPST’s expertise in offering unsecured loans, especially when traditional banks are cautious during a macroeconomic crisis, is likely to have contributed to its customer base. Moreover, Upstart’s ongoing efforts to automate the unsecured loan process might have contributed positively in the to-be-reported quarter. It is also expected to have gained from multiple partnerships with banks and credit unions, including Fibre Federal Credit Union, AMOCO Federal Credit Union, Bank of Elk River and Texans Credit Union.
Amid the weakening lending market and macroeconomic headwinds, Upstart is cutting costs by reducing workforce. This measure is likely to have aided UPST in counterbalancing the protracted high inflationary conditions that are reducing the volume of transactions on the Upstart platform.
However, headwinds from the weakening lending market due to elevated consumer risk caused by multiple bank failures and the dislocation of capital markets might have affected Upstart’s revenues in the third quarter. The volatility in the macro environment, caused by global geopolitical tension, is also expected to have hurt UPST’s performance.
The instability of the macroeconomic landscape, coupled with the growing conservatism among lenders, is likely to have resulted in heightened loan pricing within Upstart’s platform and decreased approval rates for loan applicants. Consequently, this is expected to have hurt UPST’s transaction volume growth and revenue stream.
Upstart’s Price Performance & Valuation
Upstart’s shares have risen 18.7% on a year-to-date (YTD) basis, outperforming the Zacks Financial – Miscellaneous Services industry’s growth of 8.6%. However, the stock has underperformed The Financial Select Sector SPDR Fund (XLF - Free Report) ETF and the S&P 500 index’s YTD gain of 24.1% and 20.6%, respectively.
Compared with other traditional lenders, Upstart stock has outperformed SoFi Technologies (SOFI - Free Report) but underperformed LendingClub (LC - Free Report) . Shares of SoFi and LendingClub have risen 11% and 62.6%, respectively.
YTD Price Return Performance
Image Source: Zacks Investment Research
Let us now look at the value Upstart offers to its investors at current levels. UPST is currently trading at a premium with a forward 12-month price-to-sales (P/S) of 6.5X compared with the industry’s 2.49X, indicating a stretched valuation. Its competitors, SoFi Technologies and LendingClub, have forward 12-month P/S of 2.49X and 1.79X, respectively.
Image Source: Zacks Investment Research
Investment Thesis for Upstart Stock
Upstart offers a unique approach to consumer lending by using AI-driven models to assess credit risk beyond traditional FICO (Fair Isaac Corporation) scores, giving it a potential edge in accurately evaluating borrower profiles. While rising interest rates have recently affected loan demand, Upstart’s model positions it well to capture market share once rates stabilize or decrease, improving affordability for borrowers.
The company has also made strides in diversifying its funding sources, securing institutional partnerships that reduce its dependency on holding loans on its own balance sheet. Upstart's innovations in personal and auto loan segments, combined with its strategic investments in new loan products, hold promise for future growth.
However, Upstart’s business model is highly sensitive to interest rates, and with ongoing uncertainty around the Federal Reserve's future rate policies, its loan origination volumes may continue to struggle.
Conclusion: Sell Upstart Stock for Now
While the stock has delivered extraordinary gains in a short period, its premium valuation suggests that further upside may be limited in the near term. Also, considering the uncertainty over the Federal Reserve’s interest rate policies, it would be wise to sell the stock now.
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Should You Buy, Hold or Sell Upstart Stock Before Q3 Earnings?
Upstart Holdings (UPST - Free Report) is slated to report third-quarter 2024 results on Nov. 7, after market close.
The company expects revenues of approximately $150 million for the quarter. The Zacks Consensus Estimate is currently pegged at $149.9 million, suggesting an improvement of 11.4% year over year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The consensus mark for earnings is pegged at a loss of 14 cents per share, wider than the year-ago quarter’s reported loss of 5 cents. The loss per share estimate has narrowed by a penny over the past 60 days.
Image Source: Zacks Investment Research
UPST’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, the average surprise being 12.1%.
Upstart Holdings, Inc. Price and EPS Surprise
Upstart Holdings, Inc. price-eps-surprise | Upstart Holdings, Inc. Quote
Earnings Whispers for Upstart
Our proven model does not conclusively predict an earnings beat for Upstart this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
UPST has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors to Influence Upstart’s Q3 Results
Upstart’s third-quarter performance is likely to have gained from its strategy to operate as a multiproduct company. Innovative product launches like the Upstart Macro Index and features like Parallel Timing Curve Calibration and Recognized Customer Personalization to promote improved data-driven decisions among lenders are likely to have favored the company’s performance.
UPST’s expertise in offering unsecured loans, especially when traditional banks are cautious during a macroeconomic crisis, is likely to have contributed to its customer base. Moreover, Upstart’s ongoing efforts to automate the unsecured loan process might have contributed positively in the to-be-reported quarter. It is also expected to have gained from multiple partnerships with banks and credit unions, including Fibre Federal Credit Union, AMOCO Federal Credit Union, Bank of Elk River and Texans Credit Union.
Amid the weakening lending market and macroeconomic headwinds, Upstart is cutting costs by reducing workforce. This measure is likely to have aided UPST in counterbalancing the protracted high inflationary conditions that are reducing the volume of transactions on the Upstart platform.
However, headwinds from the weakening lending market due to elevated consumer risk caused by multiple bank failures and the dislocation of capital markets might have affected Upstart’s revenues in the third quarter. The volatility in the macro environment, caused by global geopolitical tension, is also expected to have hurt UPST’s performance.
The instability of the macroeconomic landscape, coupled with the growing conservatism among lenders, is likely to have resulted in heightened loan pricing within Upstart’s platform and decreased approval rates for loan applicants. Consequently, this is expected to have hurt UPST’s transaction volume growth and revenue stream.
Upstart’s Price Performance & Valuation
Upstart’s shares have risen 18.7% on a year-to-date (YTD) basis, outperforming the Zacks Financial – Miscellaneous Services industry’s growth of 8.6%. However, the stock has underperformed The Financial Select Sector SPDR Fund (XLF - Free Report) ETF and the S&P 500 index’s YTD gain of 24.1% and 20.6%, respectively.
Compared with other traditional lenders, Upstart stock has outperformed SoFi Technologies (SOFI - Free Report) but underperformed LendingClub (LC - Free Report) . Shares of SoFi and LendingClub have risen 11% and 62.6%, respectively.
YTD Price Return Performance
Image Source: Zacks Investment Research
Let us now look at the value Upstart offers to its investors at current levels. UPST is currently trading at a premium with a forward 12-month price-to-sales (P/S) of 6.5X compared with the industry’s 2.49X, indicating a stretched valuation. Its competitors, SoFi Technologies and LendingClub, have forward 12-month P/S of 2.49X and 1.79X, respectively.
Image Source: Zacks Investment Research
Investment Thesis for Upstart Stock
Upstart offers a unique approach to consumer lending by using AI-driven models to assess credit risk beyond traditional FICO (Fair Isaac Corporation) scores, giving it a potential edge in accurately evaluating borrower profiles. While rising interest rates have recently affected loan demand, Upstart’s model positions it well to capture market share once rates stabilize or decrease, improving affordability for borrowers.
The company has also made strides in diversifying its funding sources, securing institutional partnerships that reduce its dependency on holding loans on its own balance sheet. Upstart's innovations in personal and auto loan segments, combined with its strategic investments in new loan products, hold promise for future growth.
However, Upstart’s business model is highly sensitive to interest rates, and with ongoing uncertainty around the Federal Reserve's future rate policies, its loan origination volumes may continue to struggle.
Conclusion: Sell Upstart Stock for Now
While the stock has delivered extraordinary gains in a short period, its premium valuation suggests that further upside may be limited in the near term. Also, considering the uncertainty over the Federal Reserve’s interest rate policies, it would be wise to sell the stock now.