Shares of Upstart Holdings (UPST) jumped more than 17% in after-hours trading yesterday after beating both sales and earnings expectations for the second quarter. The company operates a proprietary (artificial intelligence) AI-enabled lending platform, connecting millions of customers to banks and credit unions.
Details About Upstart’s Q2 Performance
Upstart’s adjusted loss of $0.17 per share was significantly lower than the analysts’ consensus estimate of a loss of $0.39 per share. Similarly, revenue of $127.63 million exceeded the consensus of $124.55 million. However, the figures showed a declining trend from the comparative period last year. In Q2 FY23, UPST posted an adjusted profit of $0.06 per share on revenue of $135.77 million.
In Q2, Upstart originated 143,900 loans worth $1.1 billion across the platform. However, loan origination volumes were 6% lower compared to Q2 FY23. In contrast, the conversion rate improved to 15% from 9% in the prior-year quarter. The company is confident about its “comeback story” based on increased funding inflows, better margins, and higher expected growth in the upcoming quarters.
Upstart Provides Upbeat Outlook
For Q3 FY24, Upstart projects revenue of roughly $150 million (up 11.1% year-over-year), while the Street’s consensus is pegged at $135.3 million. Net loss for Q3 is expected at about $49 million, higher than the prior-year quarter’s loss of $40.3 million.
For the second half of FY24, Upstart expects revenue from fees (the main revenue driver) of $320 million. Moreover, the company hopes to reach positive EBITDA (earnings before interest, taxes, depreciation, and amortization) in the fourth quarter of the year.
Website Traffic Hinted at Sluggish Growth
According to TipRanks’ Website Traffic tool, the total estimated visits to all of Upstart’s websites worldwide fell by 42% in the year-to-date period compared to last year. The weak website footprint hinted at sluggish growth for the quarter, ahead of the results. As indicated by the results discussed above, the company’s Q2 revenue fell by 6% year-over-year.
Is Upstart a Buy or Sell?
Owing to Upstart’s stumbling performance in the prior quarters, analysts have a bearish view of the stock’s trajectory. On TipRanks, UPST has a Moderate Sell consensus rating based on seven Holds and eight Sell recommendations. The average Upstart Holdings price target of $18.29 implies 23.4% downside potential from current levels. UPST shares have already declined 26.4% year-to-date.
It is important to note that these ratings are subject to change as analysts might revisit their recommendations following the Q2 print.
