The stock market was having a sharply negative day on Wednesday, mainly due to a hotter-than-expected inflation report. But lending technology company Upstart (UPST 5.19%) was a big exception. As of 9:50 a.m. ET, Upstart was higher by more than 30% for the day.
Strong results and guidance
As you might expect, Upstart's earnings report is the main catalyst behind the move. The company handily beat expectations on both the top and bottom lines, as revenue surged by 56% year over year and the company was nicely profitable on an adjusted basis, compared with a loss in the same quarter a year ago.
Upstart's loan platform was far more active than many had expected, with 68% year-over-year growth in loan volume to $2.1 billion, and a dramatically improved conversion rate (a higher percentage of applicants end up getting loans).
Perhaps even more important, Upstart's 2025 guidance was far better than investors had anticipated. Management expects about $1 billion in revenue, which would be the company's highest ever, and to not only grow adjusted earnings, but to be "at least breakeven" on a generally accepted accounting principles (GAAP) net income basis -- something Upstart hasn't achieved since 2021.
Massive growth opportunities
To be clear, there's still plenty of room for Upstart to grow its personal loan origination business. The personal loan market is estimated to be about $155 billion in size, and Upstart's annualized volume is about $8 billion, based on the fourth-quarter numbers.
However, it's important to realize that Upstart also originates auto loans and home equity lines of credit (HELOCs), and these could be the most important growth drivers. In the fourth quarter, these two loan types combined for just over 3% of Upstart's volume, but grew at 61% and 59%, respectively, over the past quarter alone. With auto loans estimated to be a $677 billion market, and U.S. homeowners having about $35 trillion in home equity, there could be tremendous room to scale this part of the business.
