Chang - I don’t want to defend the indefensible. Yes, Upstart is a complex story, even more so than I thought. But in the end, IMO, the thing that matters most is, have they actually have developed a disruptive technology? And do they have a significant moat to protect it?
I am reasonably confident that the answer to both questions is “yes.” And if that’s the correct answer, then this current erosion in stock price is likely to be transitory. And let me point out, that our SaaS favorites have suffered a similar fate.
You pointed out that the models appear to be discriminative and that that’s a good thing. But you qualified you assertion by asserting, The only problem with this chart is that I can’t see the sample size for each of the vintage (they could be cherry-picking the FICO segments) and it also doesn’t show year to year trend on whether the model performance has degraded or not recently.
To be blunt, you’re suggesting that the management may well be disingenuous, maybe even somewhat slimy. Of course, we aren’t mind readers and anything is possible. But I would suggest that at no time have been given any evidence that might cause us to question the integrity of Upstart’s management. I concede, I might have missed some things, but I don’t think so. I find it hard to believe that Girouard and the rest of the Upstart C-suite would conceal important information in an attempt to make things “look good.” If that were their game, I would think that this would not be the only item in the quarterly print that may have been “cherry-picked.” In fact, this is a pretty subtle thing which most folks (myself included) would not have even noticed.
So for me, the question is what to do in light of the apparent fact that Upstart will not have another truly high-growth print until a number of macro influences over which they have no ability to alter improve.
In light of the immediate 50% reaction, I intend to do nothing. I believe that it’s not unwarranted, but at the same time, over done, probably driven by a lot of bot sell orders. I’ll be watching for a bounce (am I overly optimistic? Maybe . . .). But, assuming there is a bounce, then what? I’m not sure. As noted, there’s not a holding in my portfolio that has performed will in the last several months. If I sell Upstart, what do I do with the money? Datadog? Already my largest holding, I’m not very comfortable with making it bigger. Start a new position in Mongo? That’s worth considering. I don’t have an immediate answer.