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Why Upstart Holdings Stock Jumped, Then Dropped, Friday

By Howard Smith - Mar 19, 2021 at 10:58AM

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The loan platform provider impressed investors with its first public earnings report.

What happened

Lending platform company Upstart Holdings (UPST 23.47%) went public through the initial public offering (IPO) process in December 2020. After it reported its first quarterly earnings as a public company this week, shares soared. Today, the stock continued that move, rising as much as 12%, before giving up all of those gains. As of 10:30 a.m. EDT, shares had moved lower by more than 4%. 

So what

After a day of almost 90% gains, investors initially continued that run on Friday before the stock retreated. In its earnings report, the AI-driven lending platform company told investors that it was acquiring Prodigy Software, and gave guidance for the full year 2021. Investors loved what they heard, and today seems to be just taking a breather from such a sharp stock move. 

cash on top of a paper  with credit score marked excellent

Image source: Getty Images.

Now what

The acquisition of Prodigy Software will expand Upstart's offerings into the auto loan segment. Prodigy is a provider of cloud-based automotive retail software. Upstart co-founder and CEO Dave Girouard said of the acquisition, "Upstart is on a path to reduce the cost of auto financing, and we can accelerate this opportunity with a modern multi-channel purchase experience."

The new growth segment helped allow the company to give investors strong guidance looking ahead. Upstart guided for first-quarter revenue of $115 million at the midpoint of the range, and full-year revenue of about $500 million. That's 115% growth on the year, giving investors confidence for the future of the newly public company.

Today's initial gains continued that momentum, and the subsequent drop seems likely to be a breather for investors to digest the current valuation. Today's $8.5 billion market cap gives the company a price-to-sales ratio of 17 for 2021, moving expectations much higher. 

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Upstart Holdings, Inc. Stock Quote
Upstart Holdings, Inc.
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