I am long Upstart with a 9% Position
Solid article that points out some of the risks/concerns
- Fintech is a competitive space
- Not clear why the AI is revolutionary or disruptive
- Customer/Partner concentration risks
- No recurring revenue to fall back on, no sticky subscription customers, no land and expand, etc.
- Moat (AI - better data and algos) is weak/questionable once AI becomes more well established in the industry
“One of the risks I think the market realizes is that lending and fintech is a very competitive space. . . it is not so clear to me that their technology is really revolutionary or disruptive. This also has to do with their “middle man”-business model which leaves a bit of a stale taste to my innovation-hungry mouth. At the moment everyone is talking about the possibilities of DeFi and here we have a “disruptive” company servicing legacy banks?”
“Upstart also has serious customer/partner concentration risks that potentially weigh on its valuation. . . Cross River Bank originated 72% of the loans facilitated on our platform and fees received from Cross River Bank accounted for 65% of our total revenue. Cross River Bank originated 72% of the loans facilitated on our platform and fees received from Cross River Bank accounted for 65% of our total revenue.”
“There is no recurring revenue to fall back on in tough times, no sticky subscription customers, no backlog, no land and expand. Every quarter Upstart has to sell new loans, and revenue basically starts from zero.”
-Upstart, a pure-play in Artificial Intelligence, is a fairly new IPO and has brought early investors huge gains so far.
-The company has already reported two blowout earnings reports that have smashed analysts’ expectations. Upstart is guiding for 157.5% growth in 2021.
-I think that Upstart was mispriced in the IPO because of uncertainty and a COVID-impacted 2020.
The company is now firing on all cylinders and the stock price has to keep up with the strong business performance.
-There are some other long-term risks to consider with this name, but I think it is a quite attractive stock at the moment.