Upstart Holdings, Inc. (UPST) Published: 2023-04-02

Upstart Holdings, Inc. (UPST)

Upstart Holdings, Inc. (UPST) is a financial technology company that uses artificial intelligence (AI) and machine learning algorithms to provide personal loans to consumers. The company was founded in 2012 by a group of ex-Google employees who believed that traditional credit scoring methods were outdated and insufficient. Upstart's innovative approach to underwriting loans has allowed it to quickly establish itself as a leader in the fintech industry.


    Innovative Technology: Upstart's proprietary AI and machine learning algorithms allow it to assess a borrower's creditworthiness more accurately than traditional lenders. Upstart's algorithms use a wide range of data points, such as education, employment history, and income, to determine a borrower's likelihood of default. This technology has enabled Upstart to approve loans for a broader range of consumers than traditional lenders, including those with limited credit histories or unconventional income sources.

    Strong Partnerships: Upstart has developed partnerships with several large financial institutions, including Cross River Bank, a FDIC-insured bank that funds and originates loans for Upstart. These partnerships have allowed Upstart to expand its reach and offer its loans to a wider audience.

    Growing Revenue: Upstart's revenue had been growing rapidly since its inception, with revenues increasing from $85 million in 2019 to $608 million in 2021. This growth is due in part to the company's successful partnerships and its ability to scale its business model quickly. In recent years its revenue growth has slowed considerably, however.

    Experienced Management Team: Upstart's management team includes experienced executives with a deep understanding of the fintech industry. The team's expertise has allowed Upstart to navigate the complex regulatory environment and establish strong partnerships with financial institutions.


    Dependence on Partnerships: While Upstart's partnerships have been a strength, they also represent a potential weakness. If one of Upstart's key partners were to terminate their relationship, it could have a significant negative impact on the company's revenue and growth prospects.

    Regulatory Risk: As a financial services company, Upstart is subject to a complex regulatory environment. Changes in regulations or enforcement actions could significantly impact Upstart's business operations and profitability.

    Competitive Landscape: Upstart faces significant competition from other fintech companies and traditional lenders. While Upstart's technology and innovative underwriting process have allowed it to stand out in the industry, competitors may be able to replicate these approaches.


Upstart's chart sure has a reverse-split look to it. But, alas, that high at around $400 really did happen.

The decline from the highs in late 2021 has been nothing short of phenomenal. This stock is a poster child for the speculative froth coming off the market. So what could have possibly caused a 97% drop (WTF?) in the stock?

The income statements over the last four quarters are shown below. That is quite a dramatic drop in revenue, and a move to net losses.

Given the company's reliance on loan volumes it is no surprise that the unprecedented increase in interest rates has had a negative effect on the company's operations.

The Fed is basically done raising interest rates for this cycle, and in any case it doesn't matter so much since rates at the long end of the bond market have been going down regardless.

Here's the same chart from above with the 10-year Treasury price overlaid in blue.

There's a high correlation between the two.

I'm going to go out on a limb here and say that it isn't the absolute level of interest rates that matters so much to Upstart's business. It's the rate of change. This has certainly been an interesting year in this regard. The Fed reversed course from "not even thinking about thinking about raising rates" to the fastest rate increases in history. This caught a lot of people off guard (hello, Silicon Valley Bank!). I do think interest rates will stay relatively high for some time though. The Fed has said as much. Inflation numbers will stay relatively high due in large part to the higher interest rates themselves.  Contrary to what most people believe the higher interest rates support the economy as they keep the Federal deficit higher than it would be otherwise. The Federal Reserve's ability to influence the economy works mainly through the housing market, and housing has cooled significantly. On top of that, there will be a massive supply of homes coming to market as supply chain issues are resolved, which will slow housing even more. So there will be a push and pull as these things manifest themselves in the inflation numbers.


Overall, Upstart Holdings, Inc. is a promising fintech company with a strong focus on innovation and technological advancement. Its proprietary AI and machine learning algorithms allow it to assess creditworthiness more accurately than traditional lenders, giving it a competitive advantage in the market. However, the company does face some risks and challenges, including regulatory risk, dependence on partnerships, and limited product offering. Despite these challenges, Upstart has a talented and experienced management team that is focused on driving growth and expanding the company's reach. If Upstart can continue to execute on its business model and successfully navigate the challenges ahead, it has the potential to become a major player in the financial services industry.

Of course, the interest rate environment has been a massive headwind for this company, but I think the worst is behind it. I think if you are willing to hold this stock for at least a year, the gains could be phenomenal. I'm calling this a speculative buy.

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This article was written by: Anonymous
  • The author does not have a financial interest (stocks, options, other) in any companies mentioned in this article.
  • The author has indicated that this article is an original work. It expresses their opinions.
  • The author does not have a business relationship with companies mentioned in this article.

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