What happened
One of the star fintech stocks of 2021 wasn't glowing so brightly this week. Upstart Holdings (UPST -7.89%) was anything but up in the Monday to Friday span, with its stock tumbling by more than 17%, according to data compiled by S&P Global Market Intelligence. One analyst has cooled notably on the stock, and that sent a chill through many investors.
So what
On Tuesday, analyst David Chiaverini downgraded his recommendation on Upstart stock to underperform (read: sell) from his previous neutral. He also substantially cut the price target on the shares, which now stands at $75, well below the preceding $110.
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Specifically, Chiaverini's main issue with the fintech is its dependence on third-party funding. He pointed out in a new research note that "this risk tends to become exacerbated during recessions and market turmoil, the beginnings of which could be in [the] process of unfolding."
On top of that, the prognosticator is concerned with "weakening delinquency trends on recent 2021 vintage securitizations that appear to be deteriorating at a faster pace than [the company's] 2018, 2019, and 2020 vintages."
The potential problem down the road for Upstart is that this trend, combined with growing macroeconomic and geopolitical risks, could weaken demand for the company's services and threaten its securitization business.
Now what
Investors clearly took Chiaverini's new view to heart. Clients might not necessarily feel the company's prospects are so dim, however. The day before the analyst made his move, Upstart announced that it has become the first partner in auto maker Subaru's certified digital tools program.
Upstart's Build and Price service, which is now part of the program, allows auto shoppers to find and secure deals on cars that are not currently in dealership inventories or in transit to same.
Upstart did not provide any estimates as to how much revenue it might derive from the Subaru arrangement.
