To The Moon

$Upstart Holdings, Inc.(UPST)$ is scheduled to announce Q4 earnings results on 13 Feb 2024 after market close. The consensus EPS Estimate is -$0.14 (+44.0% Y/Y) and the consensus Revenue Estimate is $135.3M (-7.9% Y/Y).

Degradation in the macro environment, conservative assumption for Upstart Macro Index in loan pricing, seasonal headwinds and tightening from funding partners are expected to have hurt the top line in the quarter under discussion.

Consumer delinquencies are elevated, and funding markets remain limited in their appetite for risk. This is expected to have increased loan pricing in the company’s platform and lowered approval rates for loan applicants, thus reducing transaction volume and affecting the top line.

However, Upstart’s fourth-quarter results are likely to gain from its strategy to operate as a multiproduct company. Recent launches across its product portfolio powered by generative AI and machine learning may have favored UPST’s performance in the to-be-reported quarter.

Moreover, the company is expected to have gained from a growing partner base in the fourth quarter. It is engaged with multiple prospective partners who are actively exploring long-term capital relationships.

Looking at Upstart's peers in the vertical software segment, some of them have already reported Q4 earnings results, giving us a hint of what we can expect. Agilysys delivered top-line growth of 21.3% year on year, beating analyst estimates by 0.8% and PTC reported revenues up 18.1% year on year, exceeding estimates by 2.3%. Both companies (Agilysys and PTC) traded flat on the results. 

There has been positive sentiment among investors in the vertical software segment, with the stocks up on average 8.2% over the last month. Upstart is up 11.6% during the same time, and is heading into the earnings with analyst price target of $21.5, compared to share price of $33.9.

We should be looking at better net interest income as well as compared to Q3 2023 at $94.7million.

Upstart (UPST) Last Reported Earnings

UPST last reported earnings on November 07, 2023 after the market close (AMC). The company held a conference call for investors at 4:30 PM eastern on the same day. UPST shares declined -27.3% the day following the earnings announcement to close at 21.38. Following its earnings release, 98 days ago, UPST stock has drifted +65.9% higher. From the time it announced earnings, UPST traded in a range between 19.84 and 49.62. The last price (35.47) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is 23.1%. We might see Upstart turning things around by providing a positive price effect, there have been pretty significant good earnings performance from the vertical software segment.

Upstart is leading a massive technological shift in the industry. I foresee Upstart to have gained better revenue from its new launches.

Upstart (UPST) Post Earnings Movement

The options market overestimated UPST stocks earnings move 25% of the time in the last 12 quarters. The predicted move after earnings announcement was ±20.7% on average vs an average of the actual earnings moves of 31.2% (in absolute terms). This shows you that UPST tended to be more volatile than the options market predicted for the earnings stock price reaction.

This suggest that Upstart option valuation is undervalued, this could mean price movement is volatile to move either way for 10%. I would think Upstart could have a positive upside after its earnings results.

Summary

Looking at Upstart’s peers in the same vertical software segment, most have been posting pretty positive results, but something to note is they have traded flat after their results.

Upstart might be able to ride on the current rally brought by crypto stocks and some of the tech stocks, we might be seeing a positive upside.

Appreciate if you could share your thoughts in the comment section whether you think Upstart can produce similar positive results like its peers in the vertical software segment.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.