Upstart(US:UPST) ZACKS·2025-12-17 16:41Core Insights - Upstart Holdings (UPST) shares are trading at a premium with a Value Score of D, and a forward 12-month Price/Sales (P/S) ratio of 3.83X, higher than the industry average of 3.36X [1] - Despite the premium valuation, UPST shares have underperformed, declining 31.1% over the past three months compared to the industry's 14% fall [2] - Investors' confidence is eroding due to macroeconomic conditions and concerns about Upstart's conservative lending models [3] Financial Performance - Upstart reported a 71% year-over-year revenue growth in Q3, reaching $277 million, with loan originations climbing 80% to $2.9 billion [5][9] - Loan applications increased by approximately 30% quarter over quarter, totaling over 2 million, the highest in over three years [8] - The conversion rate for loans decreased to 20.6% from 23.9% in the previous quarter, although it remains above 16.3% from a year ago [8] Operational Efficiency - 91% of loans in Q3 were fully automated, enhancing operational efficiency and scalability [9] - Upstart launched a machine learning model to optimize take rates, which is expected to improve monetization over time [10] Expansion into New Markets - Upstart is diversifying beyond personal loans, with auto, home, and small-dollar loans gaining traction, accounting for nearly 12% of total originations and 22% of new borrowers in Q3 [11] - Auto retail loan originations grew 9% sequentially, and home-equity lending approvals surged to about 20% by October 2025 [12] Market Sentiment and Future Outlook - The Zacks Consensus Estimate for 2025 earnings per share (EPS) has increased by 2 cents to $1.68, while the estimate for 2026 EPS has been revised down by 27 cents to $2.65 [17] - Despite strong fundamentals and growth prospects, the stock remains sensitive to macroeconomic conditions, particularly interest rate shifts [16][18] - Upstart is currently rated as a Hold, suggesting it is a stock worth monitoring rather than an immediate buy or sell [20]