Upstart Holdings, Inc.

Upstart Holdings, Inc. (NASDAQ: UPST) helps bank partners to originate credit through the company’s proprietary, cloud-based, artificial intelligence lending platform.

Key Updates:

• UPST announced its third-quarter results, wherein the company posted its total revenue of USD 228.450 million, significantly higher than USD 65.359 million in pcp. The above was supported by strong growth from the Revenue from fees segment.
• Net income surged to USD 29.113 million in Q3FY21, from USD 9.669 million in pcp.
• The company has a prudent capital management and reported a D/E ratio of 0.90x in Q3FY21, as compared to the industry median of 1.04x.
• On the flip side, the group reported its long-term debt to total capital of 47.4% in Q3FY21, higher than the industry median of 32.4%. A higher percentage indicates higher risk profile.
• Moreover, the company’s input costs galloped to USD 20.317 million in Q3FY21, as compared to USD 2.618 million in pcp. Continuation of the above trend is likely to dampen the company’s upcoming performances.

Technical Price Chart (as of December 31, 2021). Analysis by Kalkine

Conclusion: The stock of UPST surged ~299% in the last one year, and currently trades at an EV to Sales multiples of 10.6x on NTM basis, as compared to the industry median of 3.6x. Moreover, the company reported a negative cash conversion time of 231.2 days in Q3FY21, as compared to the industry median of 4.2 days. Hence, considering the above mixed operating performance, stretched valuation, we give a ‘Watch’ stance on the stock of UPST on December 31, 2021, and would suggest investors to wait for a better entry point.

*The reference data in this report has been partly sourced from REFINITIV.