Upstart's (UPST 2.76%) stock price chart for this year looks like the beginning of a roller coaster. Between January 1 and July 31, shares were up a whopping 420%. But then they declined precipitously throughout the month of August. Nonetheless, shares are still up 139% in 2023 (as of Sept. 7). 

Investors might be eyeing Upstart's wild swings and asking if the business should be added to their portfolios. Let's take a look at three reasons to buy this fintech stock, as well as one obvious reason to sell. 

Focus on artificial intelligence 

Upstart offers its lending partners, which are banks and credit unions, a tech-enabled platform that they can use to better assess a potential borrower's credit worthiness. Upstart's system can both keep default rates under control and expand the revenue opportunity for lenders, a setup that's a winning solution for all parties involved. 

That all sounds great, but what's Upstart's secret weapon? It's artificial intelligence (AI). This isn't a new technological breakthrough, which is what you'd think if you've checked the news in the past eight months. No, Upstart has been working with AI and data science for over a decade, and it underpins all that the business does. 

The company's platform analyzes 1,600 different variables about a borrower to get a more comprehensive understanding about a customer. And as Upstart's system approves more loans and looks at even more data, it should only get better over time. 

Large addressable market 

Lending is a big industry, especially here in the U.S. Personal, auto, home, and small business loans have an annual origination value of $4 trillion combined. That's truly a massive end market that Upstart can penetrate. 

In 2022, Upstart's AI platform handled $11 billion worth of loans, giving the business a tiny 0.3% share of the industry. If the business can get even remotely close to the growth it was posting prior to 2022, then shareholders have a lot to get excited about. 

As I noted earlier, Upstart benefits lenders by essentially allowing them to expand their own customer bases, while at the same time managing risk tightly. For consumers, the fact that taking out a loan can be fully automated is an attractive proposition as well. 

Cheap valuation 

Even since the stock has soared in 2023, Upstart shares are still 92% below their peak price from October 2021. This terrible performance can be attributed to macroeconomic headwinds. High inflation, and rising interest rates put in place to combat it, dealt a huge blow to Upstart. Lending activity basically tightened up, which has spilled over into this year. 

Upstart's stock current trades at a price-to-sales multiple of 4.8. That's much cheaper than the stock's historical average valuation since its initial public offering in 2020. The result is that investors are being presented with an opportunity to buy a disruptive company at a sizable discount. 

Cyclicality is a huge red flag 

One thing that is worrying is just how exposed Upstart is to the macro picture. The Fed's decision to hike rates last year hurt Upstart. Its revenue only declined 1% last year, and the business posted a net loss of $109 million. Through the first six months of 2023, revenue was down 56% year over year. The company's success is dependent on factors that are completely outside its control, like what direction interest rates are headed. 

A smart question that investors should ask is whether Upstart would still lose money during softer economic conditions if it was generating more revenue. Put another way, are the company's struggles more devastating right now because Upstart is still in its early stages? And in the future, as the business has scaled up, will it be able to navigate a recession in a profitable manner without credit issues? It's hard to answer this today, which makes owning the stock a risky endeavor. 

Investors have to ask themselves if the three reasons I've outlined above to buy Upstart shares hold more weight than this major red flag.