UPST: What I've done. Why I did it.

I have been a loyal follower of this board since the early days. I used to post frequently. Not so much anymore. As we have been admonished numerous times, if you have nothing worthwhile to say with respect to high growth investing, don’t post on this board. As Bear (assistant board manager)recently posted, this is not Twitter.

With that in mind, I hope that some followers will find my thoughts constructive. Here’s what I’ve done. I sold a bit more than half of Upstart in my Roth and traditional IRA accounts. I sold a relatively small amount of in my taxable account as I’ve already accumulated a large short term cap gains position due to some options sales not long ago (to buy Upstart). Even after these sales, I still have a large position in Upstart. I may still sell more.

So why didn’t I sell my entire position? John Wayne, who, IMO has brought new techniques and insights with regard to financial/business analysis to this board, sold his entire position before the conference call ended. He asserted that Upstart can no longer be considered a hyper growth company.

We have been reminded time and time again to not just follow the actions of others simply because they have been successful. While I adhere to this tenant, it would be simply foolish (and not in a good way) to ignore the actions and thinking of others who have repeatedly demonstrated their ability to determine the future performance of a company. But in the end, no one has a crystal ball. Irrespective of how well considered an investment action might be, it’s often an opinion rather than a dependable fact. Given that, I didn’t need to read about who did what in order to rapidly exit my Lightspeed position. The investment thesis was obviously broken. In addition, to put lipstick on a pig, I was able to “harvest a tax loss” (as if that’s a good thing). But it did make the decision easier.

Upstart is different. IMO the thesis remains intact. FICO has outlived it’s utility. Upstart has an almost unassailable moat. First mover with respect to ML/AI provides an enormous advantage. They have just begun to scratch the surface on loan categories.

Does one quarterly report that fell short of expectations constitute sufficient evidence to assert that the company is simply good, just like a lot of other companies, rather than a great company that deserves a major position in my portfolio? The simple answer is, I really don’t know for certain, but I’m unwilling to abandon it at this time.

As for the near term future, to be honest, I don’t expect the next couple or three quarters to be fantastic. Unsecured personal loans will continue to be lumpy. A lot of this business will depend on how many banks and CUs they can sign up. The new line of “micro” loans is hard to predict, but they just have to make a lot of them in order to generate significant revenue. I don’t have a lot of confidence that this will happen. New car loans will remain depressed as the inventory of new cars remains depressed. You can’t finance a product that isn’t available. Refinancing existing car loans seems like it could generate a lot of revenue, but I don’t have a grasp on how they intend to market that service. Still given those near term negatives, longer term (4Q22 and on), I still have considerable confidence in the company. I also feel that the market has over-reacted and that Upstart will bounce back over the next couple of weeks. Not all the way back, that’s not going to happen soon, but I feel pretty confident that some of stock price will recover (despite continuing erosion today).

And I have yet one other deterrent with respect to selling off more of my position. Generally, when I sell a position I have an accompanying transaction in mind to start or increase a position with the proceeds. I was not prepared with a purchase decision when I sold LSPD and now, hard on the heels of that sell, I’ve turned a lot of Upstart into cash. It is uncommon for me to find myself with an uncomfortably large, unproductive cash position, but that’s exactly where I am at present.

Even after all these years, I’m still learning new lessons. I welcome commentary on this post, but please, only comment if you have an analysis or rationale to offer.


Nice post.

Just to clarify, as I know a lot of posters followed UPST due to his in-depth research, jonwayne did appear to buy back in yesterday, to the tune of a 15% position. Per Twitter earlier today.

The biggest thing I keep coming back to is that they guided for acceleration in Q4, in terms of Q/Q growth. We assume they beat their forecast by at least a little, so except that is 20%+ Q/Q acceleration. You can’t do that if your business has already plateaued.

What will Q1 bring? I think that is a transition month, as auto won’t have yet materially ramped (my guess) as the new car inventory will artificially keep them from getting off to a fast start.

I think that it is an important point to distinguish an artificially-depressed macro condition (supply chain affecting new car sales) vs a company’s execution or lack thereof. Remains to be seen if market gives them a break on that or not as sentiment and momentum can override commonsense in any given trading day/week/month.

The micro loans, business loans, and mortgage loans are all “stuff they will work on” and maybe they surprise and start it a bit earlier, like in Q4 2022, but otherwise I think it is immaterial to 2022.

So you have:

  1. strong Q4 guide
  2. will they continue to add banks/CUs at good pace? If yes, then a continued catalyst on personal loan side of things.
  3. covid stimulus and savings headed back to pre-covid levels = demand in loans may rise.
  4. BNPL - I don’t see this as a headwind that much. Should be BNPL focuses on healthy FICO/credit targets anyway. Not sure how big the overlap is.
  5. Auto refinancing. If they can break in, I think this is extremely relevant.
  6. New auto loans. This is the big one, imo, and closest to recurring revenue, because people continue to buy cars over and over. They may not always need personal loans (unless, ironically, to help buy a car)
  7. mgmt seems to have a plan, are aggressive, not narrowly-focused (eye on optionality).

Here is the thing no one talks about, but it is the human psychology of a post-ER drop.
If UPST reported all their numbers just as they did, but the stock popped 10%, how many would have sold out? How many would have thought it was a bad report?

Finally, they finish 2021 at something like $805-825m. $20b mkt cap. Pricey in 2017 terms, not so much today. Like many others, I see them doing around $1.4-1.5b in 2022. A 20 P/S puts them about 50% higher in stock appreciation.

There was a time that seeing 50% upside in a stock was a lofty goal. It still is for me. Stock could go lower before it goes higher (duh) but feel pretty good about the risk/reward at the current levels over the next 12 months. If they execute on auto, then it becomes a no-brainer in hindsight.



Thanks everyone for posting about Upstart.

I have shares and didn’t think about selling them after the quarterly report. I am not really steadfast in an investment approach targeting hypergrowth in hypertime investments. But I appreciate the insight to Upstart (and other stocks) posted on this board. My investment goal is great growth over the long term. And that is why I have invested in Upstart.

For me, the metric I care about is the adoption of banking partners. Girouard predicted they will have hundreds of bank partners. He didn’t say when. It may take a year, or two, or three, or five. And if Upstart is really better at assessing credit risk, they will have those hundreds of partners and investment now will be rewarded. We see what they can do with one loan type and 30 partners. Imagine all loan types and ten times or of that many partners.

But the reason I am posting is that I see a lot of talk about auto loans. Sure, it’s a market 6 to 7 times that of personal loans. However, posters have noted that auto sales will be bigger next year and that, in a macro sense, may be the case. But for me and my expectations about Upstart and its growth, the macro sales environment for car sales is not very meaningful right now. Upstart has not reported anything meaningful about car loan revenue. And because of that, I have no real expectation for meaningful revenue from Upstart’s nascent auto loan business in 2022.

First. What I don’t know can fill a small book. I have not figured out if Upstart’s car lending is for all buyers or just the underserved and under-rated consumer that is Upstart’s mission. And I have no idea how the Prodigy network works. The press releases around the acquisition noted that $2 billion of sales were “powered” across the Prodigy network. What does that mean? How much of that $2 billion was sales to Upstart’s target market. And how much of that was financed? Will Upstart originate all the loans done on the network or will other lenders be competing on the network? Is the Prodigy network exclusive at the dealership or do the dealers have other means of customer financing?

According to the internet - the used car market is twice the new car market or even bigger at any time. The average new car price is approaching $45,000, the average used car price is up to $25,000. I don’t know if those numbers will go up next year, they may go down. But I think I know that Upstart’s targeted borrower - none to bad credit under FICO - is more likely to be buying a lower-priced used car. So, sure there may be more auto sales and a bigger loan market next year - but that doesn’t mean anything right now. UPST has no auto loan market.

And I have no idea if those auto loans UPST is talking about will be meaningful in terms of revenue with only 251 dealerships. If Upstart finances 40% of sales, (is that even realistic?)am I looking at UPST originating less than $1 billion in auto loans for their bank partners? And I have no idea if the fees for each loan will be significantly more or be on par with the 1-2% in fees typically charged for an auto loan. And how will those fees be split with the bank that funds the loans?

And after going through what I don’t know, the real reason I have no idea what type of revenue Upstart will have in 2022 is because Upstart hasn’t given us any guidance on what the revenue from the auto loan market will be. If anything, Girouard has downplayed the auto loan product as having a meaningful impact on revenue, yet. And with auto origination fees much lower than personal loans and a network that only “powered” $2 billion in auto sales - I don’t expect Upstart expects to see meaningful revenue from auto loans in 2022.

I think next year will serve to be a proving ground for Upstart auto loans and will be used to offer their bank partners another way to make better lending decisions. Most on the board have noted banks are conservative and slow to act. However, once enough banks are doing something, they will all jump on board. This ties in nicely with my long-term hopes and Upstart’s goal to eventually have hundreds and hundreds of partners for not only assessing risk for personal unsecured loans (both big and small), but auto loans, and eventually mortgages.



New car loans will remain depressed as the inventory of new cars remains depressed. You can’t finance a product that isn’t available.

While new car inventory is down and overall sales will be down in 2021, we are still talking in the vicinity of 17 million NEW cars in the US will be sold this year. So, yes, there are still many auto financings happening.

Of those, many are traditionally financed thru the Auto companies own lending arms at low rates. They subsidize this as part of the “whole deal” for moving the car. These loans are then bundled and resold or “securitized” and then the money is recycled to do it again.

So one thought is that car companies are being less aggressive in offering low interest loans given they can sell everything they are making otherwise. So perhaps this market is not a bad time to be entering the space?

Bottom line, I think we should still think of Auto Loans from Upstart as serving those without access to cheap credit from traditional sources. Those who are not served by subsidized loan rates by the car companies themselves. And the market for car loans is still huge. It represents a potential for explosive growth from here for UPST, but it is still potential.


Reading the footnotes of the Form 4 gmthebeau linked, all the the sales were part of a pre established trading plan for several trusts. CEO’s and executives often file these trading plans to trade at some future date to avoid conflicts of interest. In this case sales of these shares were scheduled to be sold back in May of 2021, regardless of price or what was happening with the company now in November.

I think this is a non event.