Better Stock to Buy: Upstart vs. Pagaya

Core Viewpoint - Upstart Holdings and Pagaya Technologies are both leveraging AI for consumer credit evaluation, showing strong earnings growth, but present different investment profiles and risks [1][8]. Group 1: Upstart Holdings - Upstart's stock initially surged post-IPO but faced a downturn due to slowing growth, though recent performance indicates a positive trend [2]. - In Q4 2024, Upstart reported a 56% year-over-year revenue increase to $219 million, with transaction volume rising 68$2.1 billion, and a reduced net loss of $2.8 million compared to$42.4 million the previous year [3]. - The company has automated 91% of its loans, with 93% of those loans funded instantly, and secured $1.3 billion in new funding commitments [5]. - Upstart's past profitability may instill confidence, but its previous struggles in a high-interest environment raise concerns about future performance [8]. Group 2: Pagaya Technologies - Pagaya has shown consistent performance, with Q4 network volume at$2.6 billion (up 9% year-over-year) and revenue increasing 28% to $279 million, although it reported a net loss of$238 million [6]. - The company has fewer lending partners (31) compared to Upstart but has secured significant funding commitments of $6 billion for 2024, making it a leading issuer of asset-backed securities for personal loans in the U.S. [7]. - Pagaya's ability to manage risk effectively under challenging conditions enhances its appeal, despite its recent profitability and complex structure [9]. Group 3: Investment Considerations - Both stocks are considered risky, with Upstart having a more established track record but facing volatility, while Pagaya is seen as cheaper and performing well under pressure [8][11]. - Investors with a higher risk appetite may find Pagaya more attractive, while those preferring a less complex investment might lean towards Upstart [12].