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jeffchua9896
2023-11-10

2013 or 2023 ?

Upstart: Buy The Panic

Upstart's shares crashed over 27% after the FinTech reported declining revenues and a higher than expected loss in the third quarter.The decline in loan volumes was largely expected, however, due to high interest rates. Upstart has potential for a rebound as interest rates fall.Upstart's long-term value lies in its AI technology that can optimize the lending process and replace traditional credit analysis.Shares of Upstart are more attractively valued on the drop. monsitj Shares of Upstart crashed more than 27% after the AI start-up submitted its earnings card for the third quarter on November 7, 2023. The FinTech start-up generated another quarter of Y/Y revenue declines and saw expanding losses in a sector that continues to suffer broadly from high interest rates and a decline in loan originations. While the Q3'23 report was not great, the market's reaction appears exaggerated given that the start-up has guided for adjusted EBITDA breakeven in Q4'23 and no sequential top line decl

Upstart: Buy The Panic

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Upstart has potential for a rebound as interest rates fall.Upstart's long-term value lies in its AI technology that can optimize the lending process and replace traditional credit analysis.Shares of Upstart are more attractively valued on the drop.   monsitj Shares of Upstart  crashed more than 27% after the AI start-up submitted its earnings card for the third quarter on November 7, 2023. The FinTech start-up generated another quarter of Y/Y revenue declines and saw expanding losses in a sector that continues to suffer broadly from high interest rates and a decline in loan originations. While the Q3'23 report was not great, the market's reaction appears exaggerated given that the start-up has guided for adjusted EBITDA breakeven in Q4'23 and no sequential top line decl","content":"<html><body><ul><li>Upstart's shares crashed over 27% after the FinTech reported declining revenues and a higher than expected loss in the third quarter.</li><li>The decline in loan volumes was largely expected, however, due to high interest rates. Upstart has potential for a rebound as interest rates fall.</li><li>Upstart's long-term value lies in its AI technology that can optimize the lending process and replace traditional credit analysis.</li><li>Shares of Upstart are more attractively valued on the drop.</li></ul><p><figure><picture> <img height=\"4800px\" loading=\"lazy\" sizes=\"(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg?io=getty-c-w240 240w\" width=\"6500px\"/> </picture><figcaption> <p>monsitj</p></figcaption></figure></p> <p>Shares of Upstart (<span>NASDAQ:UPST</span>) crashed more than 27% after the AI start-up submitted its earnings card for the third quarter on November 7, 2023. The FinTech start-up generated another quarter of Y/Y revenue declines and saw expanding losses in a<span> sector that continues to suffer broadly from high interest rates and a decline in loan originations. While the Q3'23 report was not great, the market's reaction appears exaggerated given that the start-up has guided for adjusted EBITDA breakeven in Q4'23 and no sequential top line decline. I still believe that a reboot of Upstart’s loan origination business in a lower-rate world would fundamentally create revenue and earnings tailwinds and support a share price revaluation. A short term price crash is often a long term investment opportunity!</span></p> <h2><strong>Previous rating</strong></h2> <p>I rated Upstart a strong buy in September -- This<span> Is A Great Time To Load Up The Truck</span><span> -- as I saw potential for a reaccelerating top line in a lower-rate market. High interest rates are a negative for loan demand for all kinds of loans, including personal and auto loans, so start-ups like Upstart are currently suffering. Upstart's Q3'23 results do not change my longer term outlook on the FinTech and, in my opinion, investors are dealing with a buy-the-drop situation.</span></p> <h2><strong>Upstart missed Q3'23 earnings estimates</strong></h2> <p>Upstart missed earnings estimates for the third-quarter due to continual headwinds in the origination business: Upstart reported adjusted earnings per-share of $(0.05), missing estimates by $0.03 per-share. Revenues also came below expectations.</p> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" height=\"248\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2023/11/9/53926820-16995323114739082.png\" width=\"640\"/></span><figcaption><p><span>Source: Upstart</span></p></figcaption></figure></p> <p>Upstart's revenues declined 14% year over year to $134.6M due to persistent headwinds for personal and auto loan demand in a high-rate market. The decline in revenues was broadly expected, but the market, in my opinion, overreacted to the drop in revenues. As revenues declined , Upstart didn't manage to report positive adjusted EBITDA, operating income or (adjusted) net income either.</p> <p><figure contenteditable=\"false\"><span> <picture> </picture></span><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2023/11/9/53926820-16995320847264783.png\"/></span><figcaption><p><span>Source: Upstart</span></p></figcaption></figure></p> <p>Weakness in Upstart's revenues is largely driven by people being less willing to borrow money when doing so today costs them a lot more than a year ago. As a result, the number of loans originated on the Upstart platform in the third-quarter dropped significantly.</p> <p>In the third-quarter, Upstart’s personal unsecured loan originations fell 39% while secured auto loans dropped 58% year over year. However, as interest rates normalize again, the FinTech should be able to engineer a reboot of its origination business and revert back to a growing top line as a result.</p> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2023/11/9/53926820-16995320857245462.png\"/></span><figcaption><p><span>Source: Upstart</span></p></figcaption></figure></p> <p>Not all was bad in Q3'23, however, and the platform continued to improve core lending metrics: the amount of fully automated loans increased 1 PP to 88% and the conversion rate improved from 9% to 10% quarter over quarter.</p> <h2>Adjusted EBITDA breakeven</h2> <p>Upstart has guided for EBITDA breakeven in the fourth-quarter, indicating that the company is expecting moderate pressure on its origination business. Revenues are expected to be $135M, meaning the top line should remain stable quarter over quarter as well. Analysts currently also expect that the FinTech is going to return to profitability in FY 2024.</p> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" height=\"227\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2023/11/9/53926820-16995392506309986.png\" width=\"640\"/></span><figcaption><p><span>Source: Upstart</span></p></figcaption></figure></p> <h2><strong>Upstart’s valuation vs. other FinTechs</strong></h2> <p>FinTechs are valued based on their future revenue potential. Many FinTechs, including Upstart, are not profitable at the moment, but the long term growth trajectory generally is favorable as adoption rates rise. With more banks and credit unions relying on AI-supported tech to make lending decisions, Upstart brings a strong value offer to its customers: they can optimize the lending process by out-sourcing credit analysis to technology. For financial institutions, this is a big driver of profitability because they can save money on bank personnel that has traditionally handled loan and credit evaluations.</p> <p>Upstart is expected to see a 40% decline in its revenue base this year as higher interest rates continue to set the business back... and a 33% rebound next year. The rebound in revenues assumes that the interest rate environment will normalize next year.</p> <p><figure><img height=\"366\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2023/11/9/saupload_c89ffb42271c5c6127bb52a1ca6bb465.png\" width=\"635\"/><figcaption>Data by YCharts</figcaption></figure></p> <p>With $676.1M in revenues expected for FY 2024, Upstart’s revenue potential is priced at 2.7X which is not a high multiplier factor for a (normally) growing start-up in a normalized interest rate market.</p> <p>Given the steep decline in Upstart's P/S valuation metric, Upstart is valued at a lower valuation multiplier than SoFi Technologies (SOFI). SoFi is crushing it right now, however, and the personal finance company added a ton of new members to its platform in the last year: SoFi Is Back.</p> <p>FinTechs tend to not be cheap and Upstart especially has traded at a significantly higher valuation multiple during the summer. I believe Upstart could trade at least at its 1-year average P/S ratio of 3.2X which implies at least ~20% revaluation potential.</p> <p><figure><img height=\"366\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2023/11/9/saupload_cb8ec8bb08614af43758e7df1e03557c.png\" width=\"635\"/><figcaption>Data by YCharts</figcaption></figure></p> <h2><strong>Risks with Upstart</strong></h2> <p>The biggest risk for Upstart is a that interest rates remain higher for a longer period of time than initially expected (the market currently estimates that rates will start to fall in FY 2024). A change in market expectations as they relate to interest rates would profoundly impact the FinTech’s origination performance in a negative way.</p> <p>Since Upstart’s top line performance is inextricably tied to the health of its lending business, higher interest rates are a key investment risk here. Another risk is that Upstart is not profitable at the moment, so unfavorable macro conditions could continue to depress Upstart’s earnings picture.</p> <h2><strong>Final thoughts</strong></h2> <p>Upstart’s third-quarter earnings report was not a great one and shareholders let Upstart know how they felt about it: the FinTech lost more than one-quarter of its market cap in a single day of trading, but it is likely, in my opinion, that investors are panicking and overreacting to the earnings release.</p> <div></div> <p>Upstart is not profitable right now and while the top line declined 14% Y/Y in Q3'23, I believe the long term outlook for Upstart in the AI start-up niche is a favorable one: artificial intelligence will ultimately replace more and more bank staff and credit decisions will be made by tech which is cheaper and more effective… and of course much more scalable. While it may take longer for the investment thesis to get acknowledged by the market, I believe the long term value for Upstart is there and the drop constitutes a buying opportunity!</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Upstart: Buy The Panic</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUpstart: Buy The Panic\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-10 02:10 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4649840-upstart-buy-the-panic><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Upstart's shares crashed over 27% after the FinTech reported declining revenues and a higher than expected loss in the third quarter.The decline in loan volumes was largely expected, however, due to ...</p>\n\n<a href=\"https://seekingalpha.com/article/4649840-upstart-buy-the-panic\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/995818078/image_995818078.jpg","relate_stocks":{"BK4535":"淡马锡持仓","BK4585":"ETF&股票定投概念","BK4588":"碎股","BK4166":"消费信贷","SOFI":"SoFi Technologies Inc.","BK4561":"索罗斯持仓","BK4551":"寇图资本持仓","BK4549":"软银资本持仓","UPST":"Upstart Holdings, Inc."},"source_url":"https://seekingalpha.com/article/4649840-upstart-buy-the-panic","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2382244773","content_text":"Upstart's shares crashed over 27% after the FinTech reported declining revenues and a higher than expected loss in the third quarter.The decline in loan volumes was largely expected, however, due to high interest rates. Upstart has potential for a rebound as interest rates fall.Upstart's long-term value lies in its AI technology that can optimize the lending process and replace traditional credit analysis.Shares of Upstart are more attractively valued on the drop.   monsitj Shares of Upstart (NASDAQ:UPST) crashed more than 27% after the AI start-up submitted its earnings card for the third quarter on November 7, 2023. The FinTech start-up generated another quarter of Y/Y revenue declines and saw expanding losses in a sector that continues to suffer broadly from high interest rates and a decline in loan originations. While the Q3'23 report was not great, the market's reaction appears exaggerated given that the start-up has guided for adjusted EBITDA breakeven in Q4'23 and no sequential top line decline. I still believe that a reboot of Upstart’s loan origination business in a lower-rate world would fundamentally create revenue and earnings tailwinds and support a share price revaluation. A short term price crash is often a long term investment opportunity! Previous rating I rated Upstart a strong buy in September -- This Is A Great Time To Load Up The Truck -- as I saw potential for a reaccelerating top line in a lower-rate market. High interest rates are a negative for loan demand for all kinds of loans, including personal and auto loans, so start-ups like Upstart are currently suffering. Upstart's Q3'23 results do not change my longer term outlook on the FinTech and, in my opinion, investors are dealing with a buy-the-drop situation. Upstart missed Q3'23 earnings estimates Upstart missed earnings estimates for the third-quarter due to continual headwinds in the origination business: Upstart reported adjusted earnings per-share of $(0.05), missing estimates by $0.03 per-share. Revenues also came below expectations. Source: Upstart Upstart's revenues declined 14% year over year to $134.6M due to persistent headwinds for personal and auto loan demand in a high-rate market. The decline in revenues was broadly expected, but the market, in my opinion, overreacted to the drop in revenues. As revenues declined , Upstart didn't manage to report positive adjusted EBITDA, operating income or (adjusted) net income either.   Source: Upstart Weakness in Upstart's revenues is largely driven by people being less willing to borrow money when doing so today costs them a lot more than a year ago. As a result, the number of loans originated on the Upstart platform in the third-quarter dropped significantly. In the third-quarter, Upstart’s personal unsecured loan originations fell 39% while secured auto loans dropped 58% year over year. However, as interest rates normalize again, the FinTech should be able to engineer a reboot of its origination business and revert back to a growing top line as a result. Source: Upstart Not all was bad in Q3'23, however, and the platform continued to improve core lending metrics: the amount of fully automated loans increased 1 PP to 88% and the conversion rate improved from 9% to 10% quarter over quarter. Adjusted EBITDA breakeven Upstart has guided for EBITDA breakeven in the fourth-quarter, indicating that the company is expecting moderate pressure on its origination business. Revenues are expected to be $135M, meaning the top line should remain stable quarter over quarter as well. Analysts currently also expect that the FinTech is going to return to profitability in FY 2024. Source: Upstart Upstart’s valuation vs. other FinTechs FinTechs are valued based on their future revenue potential. Many FinTechs, including Upstart, are not profitable at the moment, but the long term growth trajectory generally is favorable as adoption rates rise. With more banks and credit unions relying on AI-supported tech to make lending decisions, Upstart brings a strong value offer to its customers: they can optimize the lending process by out-sourcing credit analysis to technology. For financial institutions, this is a big driver of profitability because they can save money on bank personnel that has traditionally handled loan and credit evaluations. Upstart is expected to see a 40% decline in its revenue base this year as higher interest rates continue to set the business back... and a 33% rebound next year. The rebound in revenues assumes that the interest rate environment will normalize next year. Data by YCharts With $676.1M in revenues expected for FY 2024, Upstart’s revenue potential is priced at 2.7X which is not a high multiplier factor for a (normally) growing start-up in a normalized interest rate market. Given the steep decline in Upstart's P/S valuation metric, Upstart is valued at a lower valuation multiplier than SoFi Technologies (SOFI). SoFi is crushing it right now, however, and the personal finance company added a ton of new members to its platform in the last year: SoFi Is Back. FinTechs tend to not be cheap and Upstart especially has traded at a significantly higher valuation multiple during the summer. I believe Upstart could trade at least at its 1-year average P/S ratio of 3.2X which implies at least ~20% revaluation potential. Data by YCharts Risks with Upstart The biggest risk for Upstart is a that interest rates remain higher for a longer period of time than initially expected (the market currently estimates that rates will start to fall in FY 2024). A change in market expectations as they relate to interest rates would profoundly impact the FinTech’s origination performance in a negative way. Since Upstart’s top line performance is inextricably tied to the health of its lending business, higher interest rates are a key investment risk here. Another risk is that Upstart is not profitable at the moment, so unfavorable macro conditions could continue to depress Upstart’s earnings picture. Final thoughts Upstart’s third-quarter earnings report was not a great one and shareholders let Upstart know how they felt about it: the FinTech lost more than one-quarter of its market cap in a single day of trading, but it is likely, in my opinion, that investors are panicking and overreacting to the earnings release.  Upstart is not profitable right now and while the top line declined 14% Y/Y in Q3'23, I believe the long term outlook for Upstart in the AI start-up niche is a favorable one: artificial intelligence will ultimately replace more and more bank staff and credit decisions will be made by tech which is cheaper and more effective… and of course much more scalable. While it may take longer for the investment thesis to get acknowledged by the market, I believe the long term value for Upstart is there and the drop constitutes a buying opportunity!","news_type":1},"isVote":1,"tweetType":1,"viewCount":40,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"upFlag":false,"length":11,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}