Upstart (NASDAQ:UPST) stock has risen rapidly and increased by about 180% so far this year. The financial technology company’s strong Q1 performance and long-term funding arrangement drove UPST stock higher. Furthermore, the moderation in the inflation rate and expectations that the Fed could pause interest rate hikes remain positive catalysts. However, analysts’ price targets indicate that Upstart stock is expected to go down.
UPST to Benefit from Easing Monetary Policy
Investors should note that the majority of the loans issued on UPST’s platform were taken up by institutional investors via credit-based instruments and sent to the ABS (asset-backed securities) market. The Fed’s credit tightening adversely impacted ABS volumes and, in turn, UPST’s performance.
In addition, the rising funding costs and higher loan pricing raised concerns around originations. Also, higher delinquencies pressured UPST stock.
Thus, easing inflation and monetary policy will likely drive ABS volumes and lead to reduced funding costs, which will likely support UPST’s performance and stock price.
Further, as the company depends on third-party financing, the recent long-term funding agreements will likely act as a positive catalyst.
Analysts Maintain A Bearish Outlook
While UPST stock has recovered swiftly, analysts maintain a bearish view of the company. Mizuho Securities analyst Dan Dolev continues to recommend a Sell on UPST stock, citing a weak funding environment and a challenging macro backdrop.
In a note dated June 14, Dolev said that he recently held a meeting with UPST’s CFO, Sanjay Datta. While the analyst is “encouraged by the CFO’s upbeat outlook” following the meeting, he maintains a cautious outlook.
Besides for Dolev, Giuliano Bologna of Compass Point and David Chiaverini of Wedbush also reiterated a Sell on UPST stock last month. Both of these analysts appreciated the increased long-term funding agreements. However, the analysts raised concerns about the “preferential economics” of these agreements.
What is the Price Target for UPST?
Including those from Dolev, Bologna, and Chiaverini, UPST stock has received eight Sell recommendations. One analyst has a Buy and four analysts suggest a Hold. Overall, UPST has a Moderate Sell consensus rating on TipRanks. Meanwhile, these analysts’ average price target of $15.63 implies 57.72% downside potential from current levels.
