There has been a lot of discussion on UPST of late. I personally added significantly to my already large holdings at around 191 price point a few days ago. Sometimes buying (adding) even after a run up is still buying value. I read on the board someone saying they wanted to wait due to the run up in price.
I wanted to look at the numbers more deeply and make some assumptions for next quarter and possibly the rest of the year.
Start with Q4 2020. Q4 20 revenues were 86.7 million and were reported to be 39% increase year over year. At that time forecasted revenue for Q1 2021 was 118 million and total year 2021 revenue was forecasted at 500 million.
Q1 21 actually revenues were 121 million. This represented a 2.5% beat of forecasted revenue. 121 m in revenue was a 90% increase year over year.
In Q1 they forecasted for Q2 21 160 million in revenue and increased 2021 yearly revenue to 600 million. The increase from 500 to 600 million was a 20% increase in forecasted annual revenue.
Then in Q2 they reported 191 m in revenue which was a 19.4% beat above forecasted quarterly revenue. I think the fact the previous quarter they raised full year projection by 20% and then the next quarter they beat by just under 20% is interesting. Possibly random but interesting.
Quarter Revenue Increase in revenue Q over Q Forecasted Revenue Q4 20 86.7 Q1 21 121.0 +34.4 118.0 Q2 21 191.0 +70.0 160.0 Q3 21 ? ? 215.0 Q4 21 ? ? 223.0 (based on 750m)
They also increased 2021 revenue projection to 750 million which is a 25% increase over the previously forecasted 2021 revenue.
So for Q3 they are forecasting revenue of 215 million. This would be 24 million increase in revenue versus Q2. After Q1 they raised whole year revenue forecast by 20% and after Q2 they raised it another 25% (600m to 750m)from Q1 forecast (or 50% from original forecast of 500m at the end of Q4).
We know the Q3 quarter revenue forecast has got to be WAY low. The 24 million quarter growth forecast is lower than the increase in revenue from Q4 to Q1 (+34.4) and WAY lower than Q1 to Q2 (+70m). The fact they increased their annual revenue estimate makes me believe that the company believes the accelerated growth is going to continue.
Let’s use their numbers to look at what the they say about Q4 21 forecast. You have 750m (forecasted 2021) minus 527m (121m (Q1) + 191m (Q2) + 215m (forecasted Q3)) gives you 223m for Q4 21 forecasted revenue.
If you just used 70m in quarterly growth from Q2 to Q3 that would give you 261 million in revenue for Q3 or 36.6% Quarter over Quarter growth. They just raised overall annual revenue 25% previous quarter just had raised it 20%. This signals to me that 70m increase Q/Q is probably low and conservative estimate.
What would that look like for overall forecasted 2021 revenue growth?
750m (forecasted 2021) minus 57m (121m (Q1) + 191m (Q2) + 261m (guesstimate Q3)) leaves you with only 177m for Q4 21 forecasted revenue. That is highly unlikely.
So let’s make some more assumptions. Let’s just assume Q/Q revenue growth stays consistent at 70m. Using a 261m Q3 guesstimate it would give us a 331 Q4 21 revenue guesstimate.
That would put 2021 revenues at 904m (121+191+261+309). That represents another 20.5% increase over the 750m forecasted recently.
Question I have to ask myself is do I believe these guesstimates are realistic? I do in fact I believe they maybe a bit conservative.
The change in revenue growth between Q4 and Q1 was 39.6%. The change between Q1 and Q2 was 57.8%. Using the 70m of added revenue Q3 and Q4 would represent a change of 36.6% and 26.8%.
One concept often discussed on this board is the concept of valuation being difficult as it gets compressed by high growth. Many of the other names discussed on this board in my opinion do not have the value points that UPST is representing due to the rapid rate of growth this company is displaying.
I would welcome feedback on these numbers and thought process.