It's been a disappointing past four years for Upstart Holdings (UPST 6.22%) shareholders. The stock's gone nowhere since falling back from its late 2021 peak following its 2020 public offering. Although 2023 was a pretty poor year for its business (following incredible growth during the COVID-19 pandemic's height), the company's put itself back on a growth track in the meantime. The stock just hasn't budged.
However, there's a good chance that 2026 could be the year Upstart shares finally start making permanent forward progress.
What's Upstart?
Upstart is a different kind of lending platform. While Equifax, Experian, and TransUnion remain the industry's three primary players, all three of them continue to create and share credit scores using the same simplistic formulaic approach they've used for decades. It still works. But Upstart's way of determining an individual's creditworthiness is arguably better.
Image source: Getty Images.
Upstart uses an artificial intelligence algorithm that considers over 2,500 different variables about prospective lenders to determine their likelihood of repaying a loan. Upstart's model allows for 43% more loan approvals with no additional defaults, compared to more traditional credit-scoring tools.
Lenders are finally catching on, too. As of the latest count, more than 100 banks, credit unions, and other lenders are now regular customers of its platform. Moreover, through the first three quarters of 2025, the company's revenue was up nearly 80% year over year, pushing Upstart out of the red and into the black. Guidance for the fourth quarter, and analysts' estimates for this year, suggest that strong forward progress is in the cards at least through 2027.
So why isn't the stock moving like it?
Bullish realizations are coming
Blame the company's recent warning, mostly. In early November, Upstart's AI algorithm predicted an economic headwind, raising lending standards, and ultimately leading to third-quarter loan originations that fell measurably short of analysts' expectations. The market panicked, recognizing this headwind could linger.
NASDAQ: UPST
Key Data Points
There are two important details being overlooked here, however, that will become nearly impossible to ignore this year.
First, this is precisely how the artificial intelligence algorithm is supposed to work. It's protecting lenders, which is far better than allowing them to make bad loans. Its origination business will be crimped in the short run, but the long-term value of its credit-scoring technology should actually shine through because of a lackluster economy.
Second, although growth is slowing, analysts are still calling for a per-share profit of $2.38 this year. The stock's trading at less than 20 times that figure right now, which is a bargain for any name still growing as quickly as this company is. It's just going to take most of the year to push all the way past the weak earnings still being reported in early 2025, so its trailing 12-month numbers start looking healthy. By the middle of this year, investors should start to realize that its recent results have been understating Upstart's actual profit potential.
