Year to date, shares of Upstart (UPST +4.64%) have fallen 15% and shares of Atlassian (TEAM 2.29%) have tumbled 30%, but certain Wall Street analysts expect shareholders to see triple-digit returns in the next year.
- Hal Goetsch at B. Riley Financial has set Upstart with a target price of $105 per share. That implies 102% upside from its current share price of $52.
- Keith Weiss at Morgan Stanley has set Atlassian with a target price of $320 per share. That implies 101% upside from its current share price of $159.
A word of caution, the target prices I just quoted are the most bullish forecasts on Wall Street, so investors should not simply assume the analysts are correct. Read on to learn more about these artificial intelligence stocks.
Image source: Getty Images.
Upstart Holdings: 102% implied upside
Upstart is an artificial intelligence (AI) lending platform that helps banks and credit unions better assess credit risk. Most lenders currently use simple rules-based systems built around FICO scores, but the limited number of variables they consider can lead to inaccuracies. Upstart solves that problem by analyzing over 2,500 data points per applicant, and its machine learning models improve each time a borrower makes or misses a payment.
Upstart's AI lending platform has models that optimize customer acquisition, fraud detection, and default forecasting. It also automates the underwriting process in most cases. In turn, lending partners profit because they can approve more borrowers at lower interest rates. Upstart says loans originated on its platform since Q2 2023 are on pace to return 11.3% annually, topping the yield on 10-year Treasury bonds by 7 percentage points.
Upstart reported solid second-quarter financial results. Total revenue increased 102% to $257 million driven by strong growth in personal loans, the core business that accounts for 90% of total originations. But demand for newer products (auto loan and home loans) increased exceptionally quickly. Meanwhile, non-GAAP net income was $0.36 per diluted share, up from a loss of $0.17 per diluted share last year.
Looking ahead, Wall Street estimates Upstart's adjusted earnings will grow at 66% annually through 2027. That makes the current valuation of 60 times earnings look relatively cheap, especially when the company beat the consensus earnings estimate in each of the last six quarters.
As a caveat, Upstart stock is very sensitive to macroeconomic data. Demand for loans depends in part on interest rates, so anything that makes rate cuts less likely would bad news for the company. Similarly, anything that hints at a slowdown in consumer spending, such as weak jobs data, would also be bad news. Investors comfortable with volatility should consider buying a small position.
NASDAQ: UPST
Key Data Points
Atlassian: 101% implied upside
Atlassian develops work management and service management software. The company is best known for Jira, a platform that helps teams plan, track, and collaborate on projects. Jira is the industry standard among software developers, but the product has also gained traction with non-technical departments like marketing, human resources, and finance.
Importantly, Gartner recently ranked Atlassian as a leader in work management software for development and operations teams, as well as marketing teams. No other company has been recognized as a leader in both categories. That is an important competitive advantage because it lets Atlassian efficiently deepen customer relationships by winning the business of one department and expanding across the organization.
Atlassian has also introduced AI agents for technical and non-technical teams. Rovo Dev helps developers plan, generate, and review code, while the standard version of Rovo helps other users surface insights and automate workflows in software products like Jira. Morgan Stanley analysts see Atlassian as one of the companies best position to benefit from AI agents.
Atlassian reported encouraging financial results in the fourth quarter of fiscal 2025, which ended in June, beating estimates on the top and bottom lines. Revenue increased 22% to $1.3 billion, an acceleration from the previous quarter, and non-GAAP earnings increased 48% to $0.98 per diluted share. Management also said adoption of AI products climbed 50% to 2.3 million monthly active users.
Looking ahead, Atlassian estimates its $67 billion addressable market is expanding at 13% annually. Wall Street expects the company's adjusted earnings to increase at 19% annually through fiscal 2027. That makes the current valuation of 46 times earnings look somewhat expensive, but not absurd. I am skeptical about Atlassian shares returning 101% in the next year, but investors with a three- to five-year time horizon should consider buying a small position.
