Upstart (UPST 1.35%), the AI-focused lending platform operator, has been an incredible performer. After falling by more than 95% from its pandemic-era high by the end of 2022, the company's stock has come roaring back to life. Over the past year alone, Upstart's stock price is up by about 150%.

I'll get into the reasons in the next section, but the gain is certainly justified by Upstart's business. However, the lending market remains sluggish due to persistent high interest rates, and Upstart is still trading for less than one-quarter of its all-time high. Could there be even more outperformance in store for the rest of 2025?

Why has Upstart performed so well?

The short answer is that Upstart has produced a series of better-than-expected earnings reports in a difficult environment for lending, and market conditions are finally starting to become more favorable. Plus, Upstart's underwriting model continues to produce better default rates and loan performance than traditional models.

In the third quarter, Upstart beat expectations for both earnings and revenue, and the company reported a significant increase in loan demand from outside investors for the first time since the 2022 bear market.

More recently, Upstart's fourth-quarter results looked even more impressive. Just to name a few key points:

  • Revenue increased by 56% year over year and 35% sequentially (compared to the third quarter). The top-line figure handily surpassed analyst expectations.
  • Sixty-eight percent more loan volume was originated on Upstart's platform, and its conversion rate (percentage of applicants who get a loan) increased from 11.6% a year ago to 19.3%.
  • Upstart's profitability improved dramatically. Its net loss of $2.8 million looks far better than the $42.4 million loss in the fourth quarter of 2023. On an adjusted basis, Upstart was quite profitable, with an adjusted net margin of nearly 14%.
  • Not only were the quarterly results strong, but Upstart's 2025 guidance was far greater than expected. The company expects about $1 billion in revenue, an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 18%, and to be "at least breakeven" on a GAAP net income basis.

What could make Upstart go even higher in 2025?

Despite the fantastic performance, there could be more upside ahead. While Upstart originates auto loans and home equity lines of credit (HELOCs), it's still primarily a personal loan platform. However, those two newer loan types are making fantastic progress.

In the fourth quarter, Upstart originated $43 million in auto loans and $27 million in HELOCs. This represented just over 3% of the company's total volume combined. However, these volumes represented sequential growth of 61% and 59%, respectively.

The auto loan market represents a $677 billion opportunity, more than four times the size of the personal loan market. And homeowners are sitting on about $35 trillion in home equity, according to the St. Louis Federal Reserve, which means there's a massive opportunity in HELOC lending. If Upstart can continue to scale rapidly in these areas, its loan volume could multiply several times from here.

That's especially true if interest rates fall further, which could create a surge in borrowing demand on all three of these loan types.

A high-risk, high-reward stock

There's quite a bit of execution risk involved with scaling Upstart's business to the next level. It's also entirely possible that interest rates could rise, making the lending environment even more challenging. Plus, with a valuation of about 11.5 times trailing 12-month revenue, Upstart isn't exactly a cheap stock.

While there are several catalysts that could take Upstart's stock to the next level, it isn't a sure thing. Even if things go well, it's wise to expect a bit of a roller-coaster ride along the way.