Upstart’s 2021 revenue surge of 264% was driven by favorable conditions—low interest rates and a strong lending environment. However, as rates climbed over the next two years, lending slowed sharply. Partners pulled back, revenue slipped by 1% in 2022, and fell further by 39% in 2023, with adjusted EBITDA turning negative. For 2024, analysts forecast an 11% revenue increase, yet Upstart remains unprofitable. Following a 46% gain on Friday, some investors view these ongoing losses as a sell signal.
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Still, focusing solely on short-term losses may overlook Upstart's larger trajectory. Over the past two years, Upstart has streamlined its operations, optimized its AI models, broadened funding sources, launched new products, and expanded its partner base—laying a strong foundation for growth. This operational transformation positions Upstart for sequential revenue increases, potentially reaching $400 million per quarter by late 2025, where GAAP profitability could become a reality.
Using a times-revenue valuation model, similar to Elon Musk’s acquisition valuation for X (formerly Twitter), Upstart’s projected growth and profitability potential could warrant a high sales multiple. Twitter's acquisition at an 8.7 times-revenue multiple set a reference point, even though it wasn’t profitable. If Upstart’s rapid growth trajectory continues, a 15x sales multiple could be justified, implying a market valuation of $24 billion or a share price around $263, with GAAP profitability anticipated by 2025 or 2026. High short interest at 32% and recent rate cuts add to its upside potential, with a target milestone of $130 possible by year-end. Investors may only now be starting to see Upstart’s long-term value.
$Upstart Holdings, Inc.(UPST)$
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