UPST May Not Survive

While I have written a fair amount about the “Leaders of the Future” – stocks who have been beaten down but that I believe will come back and thrive down the road – not all stocks that are down big will survive. For instance, Upstart (UPST) – an artificial intelligence lending platform for equitable access to credit, once a $400 stock – is starting to look like a potential $0.

Not too long ago, UPST was reporting impressive revenue growth and profitability metrics and appeared by all accounts to be a promising growth stock. But the wheels have fallen off. In their 2Q22 reported after the close Monday, Revenue declined to $228 million and Adjusted EBITDA to $6 million from $310 million and $63 million a quarter ago, respectively. Even worse, business continues to drop off precipitously as they guided 3Q22 Revenue to $170 million and Adjusted EBITDA to $0.

UPST’s business is complex and I don’t pretend to be an expert but the financial metrics suggest the company is in big trouble. While the biggest gains are made from great growth stocks and now is a time to be sifting through the wreckage for “The Leaders of the Future”, you do have to do your homework to avoid those stocks that are going to $0.

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