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Here's Why Upstart Is Soaring Today

By Matthew Frankel, CFP® – Aug 11, 2021 at 10:31AM

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The company's investors just got some good news.

What happened

Fintech company Upstart Holdings (UPST 5.11%), which provides an artificial intelligence-powered lending platform to help banks make smarter decisions, reported its second-quarter results Tuesday afternoon. And it would be fair to say investors are impressed with the results.

As of 10 a.m. EDT Wednesday, Upstart was higher by about 25%, handily outpacing the major market averages.

Person cheering while looking at laptop.

Image source: Getty Images.

So what

To put it mildly, Upstart shattered the market's expectations. The company posted revenue of $194 million for the quarter, more than 10 times what it produced in the pandemic-stricken second quarter of 2020 and well ahead of the $158 million analysts had been looking for. And unlike many fintechs, Upstart is quite profitable. For the quarter, Upstart earned $0.62 per share, more than doubling the $0.25 expected by analysts.

Going beyond the headline numbers, it's even more impressive. Upstart's bank partners originated $2.8 billion of loans on the platform, a 62% quarter-over-quarter increase.

Now what

Upstart also increased its guidance, which is likely fueling today's move just as much as the second-quarter numbers. The company now expects third-quarter revenue of $205 million to $215 million, while analysts had been expecting about $162 million.

For the full year, Upstart now expects about $750 million in revenue, a significant bump from the previous guidance of $600 million. Plus, Upstart's adjusted EBITDA margin is now forecast to be about 17% as opposed to the 10% the company had previously been guiding for.

The bottom line is that Upstart's second-quarter earnings was an absolute blowout in pretty much every possible way. The company's AI-powered lending platform is catching on quickly, and if the company can keep this momentum alive, things could get very interesting.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Upstart Holdings, Inc. The Motley Fool has a disclosure policy.

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