Love What You Own - InvestingChannel

Love What You Own

Proprietary Data Insights

Financial Pros Top Bond Market ETF Searches This Month

Rank Name Searches
#1 NewStar Financial Inc 3745
#2 Paypal Holdings 1688
#3 Upstart Holdings Inc 1008
#4 Visa Inc 811
#5 Mastercard Inc 526

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Financial Services

Love What You Own

Stocks become popular for a variety of reasons. Not all of them are good.

That’s why Upstart Holdings Inc (UPST) stood out like a sore thumb amongst the top credit service stock searches by financial pros.

It turns out, when shares go into a freefall, people get curious whether there’s a deal to be had.

But let’s take a step back to a story from a few months ago.

In October 2021, CNBC brought in a guest, Mark Minervini, to talk about what he’s trading, and why. 

During the interview, the host asked Mark about a stock he was in, Upstart Holdings Inc (UPST) specifically, he asked what it does. 

However, it appeared that Mark embarrassingly didn’t know the answer. But instead of admitting it, he pretended that he did not hear the question and that his audio cut off, instead of admitting he didn’t know what UPST did. 

You can watch the clip here. Since then, the shares are down more than 90%.

Today, you’ll find out what UPST does and our thoughts on the company.


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Upstart’s Business

Upstart Holdings (UPST) offers a lending platform for individuals and small businesses to connect with banks and credit unions. 

Powered by AI, the UPST lending platform partners with banks and credit unions to improve access to affordable credit. 

Over $25 billion in loans have been facilities by its platform, since Q1 2022. Borrowers love how quickly approvals can happen. 74% of loans are instantly approved and fully automated. 

The typical personal loan from a borrower will range from $1K- $50K. And auto refinances loans from $9K- $60K. 

UPST has hundreds of bank and credit union partners on its platform, utilizing its AI technology, and virtually entirely automated experience.  

As you can imagine, UPST is in a competitive niche, some of the other stocks in the space include SoFi Technologies (SOFI), PayPal (PYPL), Affirm (AFRM), LendingClub (LC), and LendingTree (TREE). 

Recently, this sector has come under intense pressure as interest rates skyrocket and home sales decline.

In fact, after the most recent earnings release, shares of UPST tumbled on a revenue miss and guidance.


UPST has experienced explosive growth over the years. 

In fact, its revenue growth is 250% (YoY). Of course, that type of growth comes at a cost. UPST has a negative cash flow, which means its spending more than it’s making. 

Luckily, the firm has an exceptional gross profit margin, which sits at 85.72%. 

Management recently guided fiscal Q2 revenues of $295 million to $305 million, which is well below the price Wall Street was anticipating. They were expecting nearly $355 million in quarterly revenues. 

Furthermore, UPST revised its yearly forecast down to $1.25 billion from the street’s estimate of $1.4 billion. Which is an indication that the company will be experiencing slower growth and profits due to the current economic climate. As lenders are starting to tighten up their belts, making it harder for borrowers to get loans. 


UPST has a P/E Ratio (TTM) of 20.07x which is actually better than PYPL at 24.15x, but not as good as Lending Club (LC) at 12.19x or Lending Tree (TREE) at 14.50x. And well below the sector median of 9.64x. 

It also has a strong price-to-sales ratio of 2.57x, which is significantly better than PYPL 3.32x, SOFI 3.82x,  and AFRM 4.47x. 

As mentioned before, UPST has an outstanding gross profit margin of 85.7%. It has a decent EBIT margin of 15.8%, and an EBITDA margin of 16.5%, which are both better than the sector median.  

But make no mistake about it, UPST is one of the fastest-growing companies in its niche. 

We’d be remiss if we didn’t explain the negative cash flow for the last two quarters.

It might seem as a shock to some. However, it’s largely due to the purchase of loans, which is a common part of the business. That’s why it’s best to look at cash flows on a rolling basis to get a better understanding of the company.

And with UPST, it can be a bit skewed given the heavy growth.

Our Opinion – 5/10

Right now, it’s a bad economic environment for companies like UPST. Plus, it’s in a very competitive niche. 

However, shares are off significantly off their 52-week highs of $401. It might be worth a stab here if you’re willing to take an extra long-term approach. 

We believe there are better opportunities currently, and would rather wait for the company to show improvements before jumping in here.

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