Upstart Stock Plunges 20% in a Month: Should You Hold or Exit?

Core Viewpoint - Upstart Holdings, Inc. (UPST) has experienced a significant decline in stock price, dropping 20% over the past month, which raises questions about whether investors should hold or exit the stock. Despite near-term challenges, the long-term growth potential of Upstart remains strong, suggesting that holding the stock may be advisable [1][8]. Market Context - The recent decline in Upstart Holdings' stock is attributed more to broader market weaknesses rather than specific company issues. A tech sell-off driven by fears of a global economic slowdown and trade tensions has negatively impacted high-growth stocks, including UPST [2]. Valuation Insights - Upstart Holdings is currently trading at a forward 12-month price/sales (P/S) multiple of 3.73X, which is higher than the industry average of 3.2X. Compared to major fintech competitors, UPST trades at a premium to LendingClub (1.19X) and Enova International (0.76X), but at a discount to SoFi Technologies (3.79X) [3][6]. Stock Performance - Shares of Upstart Holdings have decreased by 54.4% from their 52-week high of $96.43, reached on February 13. Year-to-date, the stock is down 28.6%, contrasting with a 36.7% gain at its peak in February [7]. Operational Performance - Upstart Holdings reported a 56% year-over-year increase in net revenues, reaching $219 million, and a 30% year-over-year increase in revenue from fees, totaling $199 million. Loan origination volume surged by 89% year-over-year, with 246,000 loan transactions, including 162,000 new borrowers [15][16]. Technological Advancements - The company utilizes AI and machine learning to assess creditworthiness, moving beyond traditional FICO scores. In Q4 2024, 91% of loans were fully automated, enhancing efficiency and competitiveness in the personal lending market [9][10]. The introduction of advanced AI models, such as Model 19, has improved risk assessment and loan performance predictions [12][13]. Future Growth Potential - Upstart Holdings is expanding into auto lending, home equity lines of credit (HELOC), and small-dollar relief loans, with significant growth reported in these areas. Auto originations and HELOCs both grew by 60%, while small-dollar loans surged by 115% quarter-over-quarter [11]. Financial Strength - The company achieved adjusted EBITDA of $39 million and is close to GAAP profitability, with a net loss of only $2.8 million. The non-GAAP EPS improved to 29 cents, a significant turnaround from previous losses [17][18]. Revenue growth guidance for 2025 indicates a continued upward trajectory, with a projected 59% increase [19].