No. of Recommendations: 4
*************** DISCLAIMER ***************
I don't own Upstart stock. In fact, I don't own any stocks.
I'm not qualified to give investment advice.
This is not a recommendation to buy or sell Upstart.
AI makes mistakes. Sometimes major mistakes.
This is an example of two investment approaches, not something to act on.
*************** DISCLAIMER ***************
I asked AI to evaluate Upstart (UPST) using two investment approaches, one from
Aswath Damodaran and the other from Michael Mauboussin. Below is a summary of its findings.
To keep this as brief as possible, I left out many of the details. Interested to hear your
view.
1. Upstart’s Business Is Clearly Improving
Loan Volume: 428,000 loans (+128% year over year)
Total Originations: $2.9B (+80% year over year)
Revenue: $277M (+71% year over year)
Profit (GAAP): $31.8M (versus a loss last year)
For the full year 2025, Upstart expects:
About $1.04B in revenue
About $50M in profit
2. How Loans Are Funded
Upstart used to rely mainly on banks and credit unions. Today the funding mix is more balanced:
Institutional Investors: 62%
Banks & Credit Unions: 25%
Upstart’s Own Balance Sheet: 13%
More than half of the money that funds loans now comes from long-term committed capital. This makes Upstart
more stable than in 2022, but still sensitive to credit-market conditions.
3. AI Model Improvements
Conversion rate rose from 16.3% to 20.6%.
This means more borrowers are getting approved at rates they can accept without creating more risk for lenders.
Stronger conversion rates improve revenue and profitability.
4. Damodaran Perspective: Intrinsic Value
Damodaran’s approach asks what the business is worth based on long-term performance. Updated valuation ranges:
Bear Case: $15–$22
Happens if the economy weakens, loan buyers pull back, or profits fall.
Base Case: $50–$65
Happens if loan volumes grow steadily, margins stay healthy, and funding remains stable. This is near today’s
stock price.
Bull Case: $100–$135
Happens if new products like Auto and HELOC scale well, underwriting improves, and profits grow strongly.
5. Mauboussin Perspective: What the Stock Price Assumes
Mauboussin’s approach focuses on what today’s share price is already assuming.
The market appears to expect:
Modest growth
Modest margins
Slow progress in Auto and HELOC
Cautious funding availability
Slow profit growth
But Upstart’s actual results suggest stronger performance:
Loan growth is far higher than “modest”
Margins are stronger than expected
Funding is more stable than feared
New products are attracting attention
AI models are improving
Bear Case: $15–$22
Happens if macro conditions worsen, loan buyers shrink back, or margins deteriorate.
Base Case: $50–$65
Happens if moderate growth and margins continue and new products grow slowly.
Bull Case: $100–$135+
Happens if Auto and HELOC grow faster than expected, conversion improves, funding scales, and Upstart keeps
beating expectations.
6. Macro Environment
Upstart is heavily affected by the health of the credit markets. Right now:
Investor optimism is high
Credit spreads are low
Lenders are taking more risk
Stocks in general are priced for good outcomes
This environment helps Upstart, but it may not last. If the economy slows or investors become more cautious,
Upstart’s growth can slow quickly.
7. Final Takeaway
Upstart’s business is performing much better than the market seems to expect.
Growth is strong, profitability has returned, funding is more stable, and the company’s AI models are improving.
Both Damodaran and Mauboussin suggest the stock could be undervalued if current performance continues.
However, Upstart is closely tied to the broader economy. If credit conditions worsen, results could weaken quickly.
Upstart is a high-potential, high-volatility investment. Investors should expect big swings in either direction.
No. of Recommendations: 1
Some of these AI analysis tools are absolutely amazing - in this case consolidating months of learning about a few different valuation methods into a 30 second response. Thanks for posting.
FC
No. of Recommendations: 1
Agree they are amazing. However, it requires some work and knowledge on the part of the user to train them to do this sort of thing. Those AI responses weren't by any means "out of the box".
