What happened
Shares of Upstart (UPST 2.76%) were moving higher today after one research firm hiked its price target on the stock and called for better-than-expected results in its upcoming second-quarter earnings report. Upstart also seemed to benefit from another short squeeze.
As a result, Upstart stock was up 18.6% as of 1:47 p.m. ET.
So what
BTIG lifted its price target on Upstart from $42 to $72 this morning and maintained a buy rating on the artificial intelligence (AI)-based consumer lending company.
The company expects a strong top-line beat after an analysis of web traffic. It also said that short covering seemed to have fueled the stock's recent rally, as shares have more than quadrupled in the last three months as a better-than-expected first-quarter earnings report, signs that the economy is recovering, and an extended short squeeze have propelled the stock higher.
Today, Upstart seemed to benefit from another round of short covering, as more than 17 million shares had changed hands before 2 p.m. ET, nearly double the three-month average of 10.6 million. As of the end of June, 38% of the float was sold short, a good setup for a short squeeze, especially as the stock continues to move higher.
Now what
Investors are also looking forward to Upstart's earnings report in two weeks, which follows generally strong reports from the banking sector that are showing consumer confidence and demand for loans seem to be returning. That's great news for Upstart.
The company's business seems like a leveraged play on the overall economy, based on its results since its 2020 initial public offering (IPO). The company delivered blowout growth and strong profits in 2021 before cratering in 2022 as interest rates rose, credit standards tightened, and fears of a recession spread throughout the economy.
Wall Street has low expectations for the second quarter, forecasting a 41% decline in revenue to $134.9 million and a loss per share of $0.07, compared to profit of $0.01 per share.
The good news for investors is that it won't take much for Upstart to beat those expectations. We'll learn more when the report comes out on Aug. 8.
