What happened
Upstart Holdings (UPST -2.94%) stock is rising again. Shares of the artificial intelligence (AI) lending platform are up by as much as 25% this week after falling last week, according to data provided by S&P Global Market Intelligence. With the AI boom (bubble?) swinging into full gear, it is no surprise to see traders keep bidding up shares of Upstart, which talks about AI all the time.
As of this writing -- halfway through 2023 -- shares of Upstart are up 178% year to date (YTD).
So what
There was no relevant news on Upstart this week, but with the market continuing to climb higher to close out the first half of the year, it is no surprise to see shares of the stock ripping again. Upstart is a lending platform that uses its proprietary AI tools to price loans for consumers without the need of a credit score, hopefully with better performance rates than the competition. It works with financial institutions to price loans for their own borrowers, taking a fee on every loan made. Last quarter, there were just under $1 billion worth of loans processed by third parties using Upstart's algorithms.
Upstart stock also is heavily shorted, with short interest estimated to be around 35%. This means a good chunk of its shares outstanding are sold short, which can induce a short squeeze when short sellers decide to buy back shares from whoever loaned the shares to them. A short squeeze is what this is known as, and can increase the volatility of a stock, both upwards and downwards.
Upstart shares are likely up because of a short squeeze and the AI theme. Nothing has changed with the business this week, though.
Now what
Throughout the last few quarters, Upstart's business has actually deteriorated pretty sharply. Net income fell to an all-time low of -$270 million over the last 12 months, with revenue down 41% from all-time highs. Credit markets have tightened up, especially for individuals that Upstart targets, decreasing the number of loans flowing through its platform. Upstart has laid off a good chunk of its workforce to try and improve its profit margins, but things look pretty bleak at the moment.
You may be bullish on the company's long-term prospects, but right now, Upstart is struggling a lot and is failing to generate a profit for shareholders.
UPST Net Income (TTM) data by YCharts
