Shares of
Upstart Holdings
were tumbling Wednesday after the artificial-intelligence lending company’s first-quarter financial guidance disappointed.
Shares of
Upstart
were falling falling 17% on Wednesday to $27.20 and were on pace for their lowest close since Nov. 30, 2023, and largest percentage decrease since Nov. 8, 2023, according to Dow Jones Market Data.
“This was a shock, as we previously assumed originations had bottomed and the business was right-sized for depressed levels,” J.P. Morgan analyst Reginald Smith wrote in a research note. He lowered his price target to $24 from $26 and maintained his Underweight rating on the stock.
Upstart
said late Tuesday that it expects to report first-quarter revenue of $125 million, below analysts’ estimates of $152 million. The company also guided for a loss of earnings before interest, taxes, depreciation, and amortization of $25 million, when analysts were expecting Ebitda of $5 million.
On the company’s earnings call, Chief Financial Officer Sanjay Datta said that rising delinquencies have started to make their way to more affluent borrowers, which has led Upstart o be more conservative in its loan pricing for those borrowers.
“We fear that challenging credit quality performance combined with
macro risk could continue to pressure appetite from Upstart’s credit buyers and the securitization market,” Wedbush analyst David Chiaverini wrote. He maintained an Underperform rating and $10 price target on the stock.
For the fourth quarter, Upstart reported a loss of 11 cents a share, in line with analysts’ estimates. Revenue of $140.3 million was above the consensus call of $134.8 million.
Chief Executive David Girouard said that 2023 was a challenging year for both Upstart and the lending industry as a whole as interest rates remained historically high and multiple bank failures led to caution among lenders.
“Looking ahead, we remain cautious about the near-term outlook for our business and we’ll continue to operate responsibly in this environment,” Girouard said.
Needham analyst Kyle Peterson maintained his Hold rating (he doesn’t have a price target on the stock) and wrote that “while we view UPST as a long-term winner in the digital lending space, we expect the recovery to remain uneven until credit performance improves and the macro environment stabilizes. As such, we do not foresee a meaningful positive catalyst for the shares.”
Write to Angela Palumbo at [email protected]
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