What happened
Upstart (UPST 2.89%) saw its stock price surge 21.1% higher this week, as of Friday at 10:40 a.m. ET, according to S&P Global Market Intelligence. It had been up as much as 28.5% this week. The stock was trading at about $16 per share as of Friday morning, up roughly 21.5% year to date.
The markets were mixed this week, as the S&P 500 fell 0.1% and the Dow Jones Industrial Average dropped 1.1%, but the Nasdaq Composite was up 0.6%.
So what
It was a tough quarter for banks and lenders, but Upstart surged higher after beating projections for revenue and earnings in the first quarter. But the fintech, which deploys artificial intelligence (AI) to process loan requests for individuals and financial institutions, was far off the pace from a year ago. Revenue in the quarter was down 67% to $103 million. Fee revenue was down 63% year over year to $117 million, offsetting gains in interest income.
The company posted a net loss of $129 million in the quarter, or $1.58 per share, down from $33 million in net income a year ago in the first quarter.
The stock price rose, however, on a brighter outlook for the second quarter. The company anticipates revenue of $135 million in this quarter, which is up from the first quarter and higher than analysts' projections. Also, the net loss would be $40 million, down considerably from Q1.
Investors were also pleased to learn that the company had secured $2 billion in long-term funding agreements from its partners over the next 12 months. This is a big shot in the arm for its business and a vote of confidence from its institutional investors.
Now what
Upstart CEO Dave Girouard said on the first-quarter earnings call that the funding agreements were "a critical first step toward building resiliency and predictability into our business" and put Upstart in a stronger position, regardless of the state of the economy.
"We believe that these deals, as well as others in the pipeline, will provide us with a stronger and more resilient capital supply over the coming quarters," he added.
The news pleased analysts, too, as several, including Morgan Stanley and Piper Sandler, bumped up their price targets -- Morgan Stanley to $13 from $10, and Piper Sandler to $17 from $16. Considering Upstart is at $16 now, they don't see much more growth, if any, this year.
Upstart has been battered over the past 18 months, but this is a good sign that maybe the company is turning the corner. It is too early to recommend a buy, given the uncertainty ahead, but look for continued momentum in the second quarter.
