Please ensure Javascript is enabled for purposes of website accessibility

Why Upstart Holdings Stock Nearly Doubled in March

By Howard Smith - Apr 3, 2021 at 2:42PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors piled in after Upstart's first quarterly financial release as a public company.

What happened

Shares of lending platform company Upstart Holdings (UPST 8.04%) soared 96.3% in March, according to data provided by S&P Global Market Intelligence. Though there has been much volatility in the stock since the company announced its fourth-quarter and fiscal year 2020 earnings report on March 17, much of the month's gains came with the almost 90% jump after the earnings release. 

So what

Upstart uses artificial intelligence to power its lending platform used by banks and credit unions. Upstart reported fourth-quarter revenue grew 39% year over year, but the company's 2021 guidance was what impressed investors the most. The company guided for first-quarter revenue of $115 million at the midpoint of the range, and for full-year revenue to grow 115% to about $500 million. One of the catalysts for growth was also reported the day earnings were released. Upstart made an acquisition that will add an auto loan segment to the company's offerings. 

yellow road sign saying profits ahead with red stock arrow pointing up

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. Prodigy's software helps bring dealership operations more in line with the new ways people are shopping for cars. 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."

An added attraction for investors is that Upstart isn't a lender, so it doesn't take on related risks that lenders have. Rather, it provides an artificial intelligence-based platform to help lenders make better loan decisions. "Traditional credit scores leave people behind. We use artificial intelligence to expand access to reasonably priced credit," the company says of its offerings. 

In the last week of March, Upstart also released a new product that had been in limited preview use with current bank customers. The Upstart Referral Network system helps match borrowers with banks and credit unions. It enables the lenders to "build more inclusive and profitable loan portfolios that match their risk profile, and consumers get better access to more affordable credit," according to a company statement. 

Upstart started trading in December 2020 after going public through the traditional initial public offering (IPO) process. Investors see much potential in the newly public company, but it still has to grow into its current valuation. At its estimated level of 2021 revenue, Upstart is now trading at about 20 times this year's sales. That level of valuation will likely bring more volatility ahead. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Upstart Holdings, Inc. Stock Quote
Upstart Holdings, Inc.
UPST
$35.46 (8.04%) $2.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.