I am interested in following Upstart as I am a former IT guy (retired) who is into AI and I think that Upstart had a great message to bring fair access to credit to the underfunded folks. It seems the the company / stock is taking a beating for a number of reasons, some of them have to do with management’s handling of loans (I believe) and others have to do with macro environment such as interest rates and big ticket purchases.
I’m hoping that others will chime in on what they think the future of UPST is, as I think it is a complicated story. Maybe too hard for this guy.
They are struggling right now but I am watching them too. This last quarter was terrible in my view and next quarter they guided Revenue down. They have taken more loans onto their balance sheet because they can’t get their partners to take on all their loans. They are looking for a party to take on more loans so they can get back to their business of supplying loans to their customers instead of putting loans onto their balance sheet. When that happens their stock should appreciate substantially. There down fall has been the interest rates going up and squeezing their business but if they make it through this they should grow fast again. As you can see their earnings are non existent now and their Sales per share has declined. But their Loan Model is holding up so their AI is working. Here is a look at their financials.
Thanks for sharing your spreadsheet results. I need to put my glasses on and have a detailed look soon. I do understand that they are growing their end-user customers who they market to directly so that’s a good thing, but I thought their initial goal was to have financial institutions re-brand or utilize their AI engine for loan approval instead of using the Big 3 credit score companies. That would get them the biggest bang for the buck I thought.
And for the record… (and I’m only kidding here) you must not follow the famous line of Packard cars because, if you did, you’d not dump the '38 - that was one of their pivotal pre-war years. If you own a pre-war Packard, you’re a lucky person! Cheers!
TMF says there have been 64 views of this post since posting - how come so many folks look / read but choose to not respond / engage? I didn’t think this place was a spectator sport. Or is it?
C’mon folks - come out of the woodwork and let’s share here. What are your thoughts on UPST?
'38Packard ==> I hope this post gets 0 likes and 63 responses
If you are on a computer you can click the spreadsheet twice and it will open up into a bigger screen size. They are using Upstarts AI for loan approval. They either have the software on the banks site or they go to Upstart’s website to request a loan. The only requirement to get a loan is that the big 3 have you with a minimum of 300 credit score and then you can request a loan and Upst will run you through their algorithm. Also Upst will report back to the big 3 your credit account status. Do you have some other link or information that says something different?
I’d have to look for a link which if you require it, I will. It’s my understanding of this platform is that they want to do the big 3 credit rating agencies out of business - basically saying that their algorithms are out of date.
I’m pretty sure that’s their primary marketing strategy. That’s their main message, they deliver it in many ways through different channels.
I think that unless they can stop holding loans on their balance sheet, they have a broken business model. They were supposed to be a toll taker without loan risk, but have failed to achieve that status. Pass for me.
Ok 38Packard I don’t require it but I think you are mixing up the big 3 with FICO. They are looking to put FICO out of business. They feel they can tell customers which loans will hold up better than FICO can.
That is true Jim but if they find someone to take the loans then the stock is going to take off. The last earnings report they said they were trying to find someone as they did the earnings report before that. But that would be a main catalyst.
I guess I am. My understanding is that UPST provides an AI platform to assess risk of a loan applicant. Isn’t that what Equifax, Experion and TransUnion (the Big 3) do?
I can only tell you 38Packard that UPST compares their platform against FICO all the time. But they never compare themselves to the big 3. Also all of our credit reports are stored on the big 3 and they have to give us that information every year. UPST does not store our credit reports but use information to see if we are credit worthy.
Also if you look at these slides from UPST last CC and look at slide 10 you will see that they are clearly rating themselves against FICO.
Personally I am incredibly bullish on UPST in the long run. From the latest ER the AI model continues to improve and outperform FICO. In particular I find the 40%+ approval rate for minorities at ~25% lower APR to be impressive. Maybe its just the millennial in me but opening up the financial markets to underserved demographics is going to be a key growth contributor. Additionally the concern with how the AI model would hold up in non-ideal market conditions seems to be shrinking, which makes their AI model that much stronger. Also the stable addition of bank/CU partners along with the growth on the auto loan side continues to open up their access to the TAM.
I agree that I don’t love the amount of loans they are holding on their books. However, management seems to agree with that sentiment and is working on getting partners to offload the loans. So that doesn’t seem like fundamentally broken business model just an unfortunate, but IMO acceptable, short term response to the macro environment.
Next years guidance was underwhelming but to me its seems like management is doing a good job winding up the spring. With a long term approach to this stock when the macro loan environment turns around I think it’s gonna soar.
My holdings in UPST are now at -53% and am wondering if it would be better to hold or sell and invest in more recently recommended stocks? With lower interest rates maybe in the future and the possible expansion of home new mortgages might UPST prosper?
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