Upstart Holdings Inc. (NASDAQ: UPST) is a fintech that provides an artificial intelligence (AI) powered digital lending platform. The company is a disrupter in the financial services sector, promising to revolutionize lending by offering optimized data-driven credit availability to more borrowers. Its AI-based lending models assess creditworthiness via non-traditional data points and match and connect borrowers with banks and credit unions. While high interest rates have hurt its loan volumes, the impending interest rate cut cycle could improve its business moving forward as loan originations surge.

Upstart competes with lending platform providers and fintechs like LendingClub Co. (NYSE: LC), Sofi Technologies Inc. (NASDAQ: SOFI), and Affirm Holding Inc. (NASDAQ: AFRM).

Disrupting the Lending Industry with Frictionless Convenience

Upstart originates most loans through its lending platform. Most borrowers on the Upstart Marketplace receive instant approval on loans without paperwork. Rates can be provided in five minutes, and funds can be transferred into accounts as soon as 24 hours. Upstart connects three million borrowers to over 100 banks, originating $38 billion in loans.

Borrowers can log into the site and complete a quick questionnaire with basic questions, including education, annual income, and employer information. Users receive a rate quote in under five minutes with an expiration date. The loan amount, terms, and interest rate, along with monthly payment information, are provided. Borrowers can proceed forward if they choose to take a few more steps after providing their social security number to confirm their identity. The process is user-friendly and frictionlessly complete online.

UPST Stock is in a Descending Triangle Pattern

The daily candlestick chart for UPST illustrates a descending triangle pattern. This pattern is comprised of a descending upper trendline that commenced at $32.78, representing lower highs on bounces falling to the lower flat-bottom trendline support at $22.81. UPST attempted to break out on July 31, 2024, as it surged to $29.40, but shares fell back into the triangle in the following days. The daily relative strength index (RSI) has slipped to the 41-band. Pullback support levels are at $22.81, $20.68, $18.29, and $15.88.

Upstart’s Q1 2024 Earnings Set the Tone

On May 7, 2024, Upstart Holdings reported a Q1 2024 EPS loss of 31 cents, beating analyst expectations by 6 cents. Net loss was $64.6 million. The contribution profit was $81.1 million, which is up 20% YoY. The contribution margin was 59%, up from 58% in the year-ago period. Revenues rose 24% YoY to $128 million, beating consensus estimates by $2.71 million. Total fee revenue rose 18% YoY to $138 million.

The company originated 119,380 loans totaling $1.1 billion, up 13 % YoY. Conversion on rate requests was 14%, up from 8% in the year-ago period.

Upstart Lowers the Bar for Q2 But Expects a Rebound by Q4 2024

The negative momentum was expected to continue as it issued downside guidance for Q2 2024 revenue of $125 million, significantly below $145.27 consensus estimates. Revenues from fees are expected to be around $135 million. Net interest loss is expected to be around $10 million. The contribution margin is expected to be around 56%. Net loss is expected to be around $75 million. Adjusted EBITDA is expected to be a loss of $25 million.

However, the company does expect business to rebound in the second half of 2024 as fees are expected to be around $300 million, with positive adjusted EBITDA expected in Q4 2024.

Upstart Holdings second-quarter 2024 earnings are due out after the close on August 6, 2024. Consensus estimates are for an EPS loss of 36 cents on revenues of $128.17 million.

Upstart Holdings CEO David Girouard commented, "We continue to focus on improving our efficiency and financial performance while investing responsibly for the long term. As a result, we anticipate a return to sequential growth in the second half of the year and positive EBITDA by the end of the year, even in the current credit environment."

Upstart Holdings analyst ratings and price targets are at MarketBeat. There are 12 analyst ratings on UPST stock, comprised of one Buy, six Holds, and five Sells, with a 3% downside to the consensus price target of $23.05.