Worst case scenario for Upstart’s q3 repor

A lot of bulls on Upstart on this forum, myself included and then again, there were a lot of bulls on Lightspeed and we all know how that turned out.

Figured we do a thought exercise on what is the worst case scenario that could play out for Upstart heading into Q3 earnings?

We know LC had a solid quarter and raised guidance but the beat was far less than the Q2 beat and their Q4 guide seemed kinda “meh” (flat sequentially) despite the stock rallying a lot.

Essentially what could Upstart say that would cause a huge drop in share price or just scare investors/have us revisit our initial thesis?


Essentially what could Upstart say that would cause a huge drop in share price or just scare investors/have us revisit our initial thesis?

If you want to initiate a conversation… you should participate yourself. What is your thesis for this outcome?

post tenebras lux
For not in my bow do I trust, nor can my sword save me.


Well, I already noted LC’s earnings and per jonwayne, there is a belief that LC’s earnings will portend strong earnings for Upstart.

In the past 3 quarters from Q4-Q2 for QoQ growth:
LC: 39.4%, 93.2%, 20.5% (gross figures: $29.9, $98.6, $41.8)
UPST: 39.9%, 60%, ??? (gross figures: $$34.64, $72.6, ???)

In the past 3 quarters from Q4-Q2 for beat %:
LC: 11.4%, 46%, 7%
UPST: 2.8%, 21.2%, ???

Using LC as a proxy, I would assume a 10-20% beat is reasonable to believe, I think it’ll be higher given the partnerships, but worst case I would assume is a 10% beat ($237 M, 22% QoQ) and a 0-5% Q4 guide which would put revenue at $248 M and $800 M total for FY 2021.

In addition, if Upstart’s Contribution Margin Q3 guide of 45% is on target which I believe would mean more Upstart referral vs. platform/partner usage, this could hurt margins and could cause some concern to investors.

Basically, if Upstart reports what would be a “good quarter” for any other type of company, i.e. 10% beat, conservative’ish guide, and showing contribution margins are more in the mid-40s vs. high 40’s, low 50’s, the stock sells off hard.

Most likely, I would assume $250-265 M in Q3 revenue and a $275-290 M guide, but then again, this post is about worst-case scenarios. We’ve already had a bunch of predictions on what earnings will most likely be, but who knows, there’s always a chance (albeit small imo) that Upstart’s guidance disappoints and this turns into a blood bath. Hence why I wanted to see bear cases.


I think this is an important question with any investment and perhaps the lack of responses is telling.

If the earnings and story hasn’t changed, the price can still drop, particularly if there just aren’t many announcements regarding developments the market is hoping for (partnerships, mortgage exploration, etc) though that shouldn’t concern us, we know prices will drop sometimes— in fact these drops are an excellent opportunity to build our positions so long as the story has not changed.

I think one of the most damaging things for UPST could be any material increase in defaults vetted by UPST. With the subsidized unemployment benefit program ending, will we see higher defaults?

UPST has been operating during the longest economic bull run in recent history — which followed the Great Recession - representing a market salivating for lending opportunities and the economic environment to meet the demands of the lender.

Going forward, If UPST shows increased loan defaults, they may look like just another low credit / no credit lender (servicer) rather than an industry disrupting generational opportunity.

I don’t see this going that way personally. If anything, the attention the lending market is getting in regards to inequality in lending— especially in the automotive industry— any opportunity a lender has to use a third party service like UPST to assist with client selection is just good business. This is why (rumor debunk aside) a partnership with WFC actually makes the most sense to me— with their history surrounding regulatory fees, violations, and generally unscrupulous business practice, a partnership with UPST would be a pivot back toward the customer again— this would be a good start on a long journey to win back customer favor and market sentiment—

Long UPST (27%)



Well, I suppose, this was the worst case scenario.


These were pretty great results, but of course the expectations were hyper-inflated. I think it will bounce back fairly quickly, at least part-way.


"These were pretty great results, but of course the expectations were hyper-inflated. I think it will bounce back fairly quickly, at least part-way. "

^ This. If this is a worst case scenario, wow.

I am a newcomer to both with small positions, sold out of LSPD right away. Not so here.

Preliminary numbers (before I run into a meeting…):

Revenue of 228 vs guidance for 205-215 and consensus for 215.
Transaction Volume is +26% sequentially.
Guidance is for another nice sequential increase.

I don’t know if I care for how quickly it bounces. I think that the desire to be right BIG+QUICKLY leads to LSPDs.

Unlike LSPD, there is a long term-thesis here, not “oh, nice recovery play on Q3-Q4,” which is what LSPD really was for me.

And a decent market cap just became a very appetizing market cap.

My 2 c and first reaction. But I am not nearly as versed in UPST as others are.


Has the story changes? Have they dissapointed?

If not, then one should probably buy more shares now.

I’m curious to what you all think. 71% beat on EPS. Thats pretty good.


Whatever challenges $UPST is having (fraud detection, etc. TBD) this quarter, will ALSO be eventually faced by whatever competitor(s) eventually emerge…IF and WHEN they ever actually emerge.

$UPST is STILL essentially un-contested in the an entirely new market that they themselves created.

By the time any real competitors get to where $UPST was two quarters ago, they’ll still have to face whatever challenges $UPST has faced this past quarter. And by that time, $UPST will already be onto the next challenge that literally nobody else has faced before.

Nothing we learned today changes the material fact of $UPST’s dominance.