Investors disapproved of Upstart's (UPST 2.76%) fourth-quarter earnings report after the loan originator, which employs artificial intelligence, posted middling results and gave disappointing guidance.
As of 10:36 a.m. ET on Wednesday, the stock was down 20.3%.
Image source: Upstart.
Upstart can't catch a break
Upstart delivered smashing results in 2021 when interest rates were low and stimulus checks were flowing, but the business is struggling amid high interest rates.
The company said revenue fell 4% to $140 million, which was still ahead of guidance at $134.9 million. Upstart continued to struggle with weak loan demand and a tighter credit environment.
It originated $1.3 billion in loans in the fourth quarter, which was down 19% from the year-ago quarter. The conversion rate, or the percentage of applicants who take out loans, was up slightly from 10.5% to 11.6%.
On the bottom line, Upstart's performance wasn't much better. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $600,000, up from a loss of $16.6 million in the quarter a year ago. It reported an adjusted loss per share of $0.11, which was better than the consensus for a per-share loss of $0.14.
CEO Dan Girouard said: "Despite the difficult lending environment, we delivered solid results to end the year. The numbers will show that we've actually become more efficient in 2023."
Can Upstart bounce back?
The company's guidance indicated that there's no turnaround in the offing. Management forecast first-quarter revenue of $125 million, which would be up 15% from the quarter a year ago, but much worse than the consensus at $151.2 million. It also forecast an adjusted EBITDA loss of $25 million.
Management talked up some new initiatives on the call, which should help it perform when interest rates are high, but said it would provide more details later in the year.
For now, Upstart's results seem unlikely to improve unless interest rates fall, and there's no guarantee of that happening this year, even though investors have been expecting them to.
