What happened
Shares of Upstart Holdings (UPST 6.57%) soared 206.5% during the first half of 2021, according to data provided by S&P Global Market Intelligence. This continues the stock's atmospheric rise since its IPO on Dec. 16, 2020. The company priced its shares at $20, but the stock surged 47% on its first day of trading and never looked back.
Upstart's stock performance during the first half of this year crushed the 14.4% returns of the S&P 500. The results were driven by excitement over the company's AI-driven lending solutions, which helped drive rapid revenue growth. The company is also profitable, fueling even greater investor enthusiasm.
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So what
Upstart closed out 2020 in strong fashion, delivering fourth-quarter revenue of $86.7 million, up 39% year over year. The company's banking partners originated more than 123,000 loans on its platform, up 57% compared to the prior-year quarter. Upstart's contribution profit -- which represents revenue from fees minus borrower costs -- climbed 49% to $41.4 million, up from 38%, helping drive net income of $1 million.
The company revealed that 71% of loans submitted via its digital platform were fully automated and approved instantly, while 97% of its revenue comes from banks or servicing, insulating the company from credit risk.
Upstart also announced the acquisition of Prodigy, adding auto loans to the company's growing portfolio of lending products. Prodigy processes financing requests for some of the world's largest automakers including Ford, Honda, and Toyota -- just to name a few. The acquisition also helps expand Upstart's large and growing addressable market.
The company's first quarter added fuel to the fire, as revenue of $121 million surged 90% year over year. At the same time, almost 170,000 loans originated -- worth $1.73 billion -- jumped 102%. Contribution profit of $55.8 million climbed 117%, resulting in net income of $10.1 million, up a massive 573%.
Now what
Given Upstart's impressive results so far this year, it's easy to see why investors have high hopes for the fintech company. After the company's better-than-expected first-quarter results, Upstart raised its full-year revenue forecast from $500 million to $600 million. In its short history as a public company, management has been able to not only beat expectations, but also raise guidance, so its forecast might ultimately be conservative.
Additionally, Upstart's impressive operating leverage helps illustrate the scalability of the company's services, driving increasing profits to the bottom line.
The lending space is ripe for disruption, giving Upstart a long runway ahead.
