No. of Recommendations: 2
Good quarter for Upstart. Glad to see they are firmly profitable again. They guided for full year GAAP earnings of $50m, which would put them around PE 75 at today's market cap.
Not exactly a number associated with a value stock, but if the growth keeps up, UPST will grow into it's valuation within a year or two.
Good to read that small dollar personal loans, auto loans and HELOC are all growing robustly. The market for auto loans and HELOCs is enormous.
The earnings call responses indicate that the cautiousness of the model in the 3rd quarter is more of a feature than a bug: the model tightened up UPST's lending offerings a bit in response to changing economic conditions, since reversed. That reduced volume but presumably boosted profitability of the loans they did write. In retrospect, maybe the tightening wasn't needed, but hindsight is 20/20 and they are happy that their model is reacting quickly to the constantly changing lending and economic environment.
They expect to reduce the amount of loans on the books shortly and they claim to have no shortage of partners ready to make that happen.
Overall, it looks like UPST has managed the turnaround successfully: they are back on track as a profitable, fast growing company serving an enormous market.
The volatility in share price is enormous. I try not to worry about it much, but the recent drop from a share price in the 80s down to the 30s is the second such drop in just one year! I am content with my investment at this price, though I am back underwater from my initial purchase price. It's a trip that they report such good growth and decent profitability only to see the price tank by 20%. I guess if anyone were looking for an entry point, it looks like a good one to me, if you believe in the company and their future.
As usual, my main worry about the company is their heavy, heavy rewards of the insiders. For it to be a good value for run-of-the-mill investors like me, the company will have to grow like hell to overcome that drag.
