Here’s why Upstart Holdings stock rose 271% last year

What happened

Actions of Holdings reached (NASDAQ: UPST) grew by 271.3% in 2021, according to data from S&P Global Market Intelligence. This performance handily demolished the other stellar’s 27% increase S&P 500. The stock peaked in October and was up nearly 800% for the year at that time. But then it cratered about 70%. So while shareholders may have tripled their money in 2021, they are now down significantly from all-time highs for the stock. Hello, volatility.

So what

Upstart Provides Artificial Intelligence (AI) Software To Banks And Credit Unions To Help Get More People Approved For Loans, At Better Consumer Rates And With Risk Of Default lower payment for lenders. And the company is seeing an astonishing adoption rate that leads to disproportionate financial results.

Image source: Getty Images.

Start-up shares rose steadily for most of 2021, but big jumps came after the company released its financial results for the first and second quarters. It generated revenues of $ 121 million and $ 194 million in the first quarter and second quarter, respectively, with annual growth of 90% and 1,018%. However, the growth rate in the second quarter looked better than it would have been otherwise, given that revenues were down in the second quarter of 2020 due to the COVID-19 pandemic.

Upstart action began to decline at the time of its third quarter earnings report. The third quarter results were undeniably good: Revenue increased 250% year-over-year to $ 228 million, and net income tripled to $ 29.1 million. However, forward-looking indications have shown a substantial decline in the growth rate. Management expects fourth quarter revenue of $ 255-265 million, up 200% year-over-year at midpoint of forecast, but up “only” 14% quarter to quarter.

Investors don’t like to see growth slow for stocks like Upstart which have recently seen strong gains. However, to be fair, few stocks maintain annual gains of 800% – annual returns of 15% to 20% are considered sensational. For this reason, it’s no surprise to see the Upstart stock come back to Earth somewhat.

UPST Chart

UPST given by YCharts

Now what

Overview: If Upstart’s AI software is as good as it looks, it should only get better with more data. And more data comes from having more banking partners. In total, Upstart had 31 partners in the third quarter, down from just 10 in the third quarter of 2020. This growing mine of consumer credit data has the potential to improve its software and is quickly becoming a defensible competitive advantage.

In addition, Upstart still has a large avenue for growth to come. She can increase the volume of loans for her personal loan business. But the company also plans to invest in the mortgage launch in 2022. In addition, it has recently taken steps to serve the Spanish-speaking population of the United States, a historically underserved segment of the population that includes tens of millions. of people. And he is also making progress in expanding his car loan business.

Upstart is unlikely to return to 271% in 2022, or any other year to come, for that matter. But there can certainly be a title that beats the market by continuing to do what it does.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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