Upstart's AI-Driven Lending Platform Soars: Q4 Earnings Beat and Strong 2025 Outlook

It's a New Era for Upstart. Why the AI Stock Is a Screaming Buy. | The Motley Fool

Shares of Upstart (UPST -2.07%) soared last week after the company smashed estimates in its fourth-quarter earnings report, and executed across the board. The company's new artificial intelligence (AI) models and partnerships have driven a surge in loan origination volume on the Upstart platform, which uses the technology to determine borrowers' creditworthiness. Loan volume surged even as interest rates remained elevated, and it delivered growth in all key product categories, including emerging ones like home equity lines of credit (HELOCs). Upstart stock jumped more than 30% on Feb. 12 even as the broad market pulled back on a higher-than-expected inflation reading for January, news that would have typically pushed Upstart stock down as well. Let's take a quick look at the numbers, and then explore why the stock can continue to move higher. Upstart's loan transaction volume jumped 68% to $2.1 billion, driving revenue up 56% to $219 million, which was well ahead of the average estimate at $181.9 million. Total fee revenue was up 30% to $199 million, indicating strong, if slower, underlying growth. On the bottom line, the company narrowed its generally accepted accounting principles (GAAP) net loss to $2.8 million from $42.4 million in the quarter a year earlier. Its adjusted earnings per share improved from a loss of $0.11 to a profit of $0.26, easily beating estimates of a per-share loss of $0.04. Upstart's forecasts also sugested that the momentum will continue into 2025, as it expects revenue of about $1 billion, or an increase of more than 50% from 2024, and its GAAP net income will be at least breakeven. Here are a few more reasons the company appears to be entering a new growth era. Upstart is a consumer lending platform, but it differentiates itself from alternatives with its emphasis on technology. It uses a proprietary AI lending model that it says is significantly more effective than conventional FICO scores for approving borrowers' loan applications. It's also able to approve more borrowers at a lower default rate. The tech advantage is finally becoming clear for investors. Indeed, 91% of its loans were approved by automated systems, and its most recent model, Model 18, increased loan origination dollars by more than 15% with the same credit quality in the fourth quarter. That's a significant difference, and it's driven by AI. Upstart says its model approves 101% more applicants than traditional lending models, and offers APRs (annual percentage rates) that are 38% lower than traditional lenders. On the earnings call, Chief Executive Officer Dave Girouard said, "Upstart is building the foundation model for credit. Nobody else is even trying." That shows how the company is separating itself from the pack and, Girouard added, defending AI's cost-saving abilities in lending. "AI-enabled lending," he said, "is undeniably a winner for the American family." In May, the company is hosting an AI Day for investors and analysts, detailing its technology, its business model, and the opportunity in front of it. That event could be another catalyst for the stock to move higher. Upstart has a huge addressable market, estimating it at $3 trillion in loan originations, including personal, auto, home, and small businesses. Personal loans, where Upstart has historically played a large role, represent a small fraction of that at $155 billion, meaning that the company has a lot of market space to grow into. Additionally, there are other opportunities to monetize its technology beyond just originating loans with the help of its funding partners. One potentially large revenue stream would be licensing its technology. The company had done licensing deals in the past, but as its technology gets more accurate and its performance improves against the FICO score, it should become more valuable to banks and other potential licensors. Like other AI models, Upstart also expects its algorithms to get better as it gets bigger, since it now has more data to train on. That should reinforce its competitive advantage and create a flywheel effect, helping it attract more lending partners and reach more consumers. Upstart tracks macro factors closely, and its proprietary Upstart Macro Index fell during much of 2024, down 7% in the fourth quarter. That signals that the lending environment should provide a tailwind for the company in 2025, at least compared to 2024. That, combined with its improving technology, expansion in new categories, and increasing conversion rates, mean Upstart could be a big winner in 2025. At a market cap of just $8 billion, there's still a lot of upside potential for the AI disruptor.

Upstart Investors Just Got Incredible News From CEO Dave Girouard | The Motley Fool

Investors who have remained confident about Upstart Holdings (UPST -2.07%) stock throughout its challenges are finally starting to see the light at the end of the tunnel. The credit evaluation company reported excellent progress in the 2024 fourth quarter and an even better outlook. The stock soared on the news and is already up 44% in 2025. Let's see what got the market so excited, and what to expect from Upstart right now. Upstart released stellar fourth-quarter earnings last week. Revenue increased 56% year over year to $219 million, and loan volume was up 68%. For the full year, revenue was up 24%, and Upstart added 24 new credit partners. Revenue is still off of highs from when interest rates were near zero, but the company is finally in recovery mode. Although the Federal Reseerve has cut rates a couple of times, they're still high, so this was a welcome update. CEO Dave Girouard said that while it did benefit from a macro tailwind, the bulk of the top performance is attributable to the company's proprietary models that separate risk and identify good borrowers better than traditional models. The investment thesis for Upstart is all about its innovation in credit risk tools, and part of the concept is that it improves over time with machine learning and updated models. As the platform has more data, it's finding new factors that create more accuracy and lead to more approvals. Girouard noted that it backtested some of the tools is has developed today based on the macro environment, and had it had them two years ago, it would have avoided 55% of excess loan defaults over the period. So even with interest rates that are still high, it's becoming a more valuable product because it has data from this more challenging environment. Management is investing in its future, and it set out strong goals for 2025. Girouard wants to upgrade its artificial intelligence (AI) models and "dramatically increase" its pace of model innovation. He quoted a former employee saying that "Upstart is building the foundation model for credit," and he wants to supercharge its lead in AI for credit risk. If that weren't exciting enough, management gave inspiring guidance for the first quarter of 2025 and the full year. For the first quarter, it's expecting $200 million in revenue, or a 56% increase year over year, and a $20 million net loss. For the full year, it's expecting $1 billion, or a 57% increase, an acceleration from 2024. And the best part is that it's expecting net income to be at least breakeven. The guidance calls for profits in the second half of the year. Management said that its financial modeling assumes interest rates will be where they are today. There may be further rate cuts this year, and if they go through, Upstart is likely to report even higher growth and hit net profits even sooner. There are no guarantees with guidance, but what Upstart has in its favor is learned lessons. Its platform is more potent because it's been built up with data from higher interest rate conditions, and that makes it more likely that it can predict future outcomes with greater accuracy and that Upstart will return to profits this year. Upstart stock has had a volatile journey from its not-so-humble beginnings. If you'd bought at its high, you'd still be down $0.77 on the dollar. So even if you'd held through the worst, you'd still be a ways off from recovering losses. If you bought at its low, you'd be quite ok right now. Is the worst behind it? Could be. At the current price, Upstart stock trades at 12 times trailing-12-month sales. If it keeps climbing from here, that could be a reasonable valuation. But there's a lot of confidence built into that price. If it does break even this year, expect the stock to soar. But it could reach a nosebleed valuation quickly, so even though it's reporting great progress, I would only recommend a position for the highly risk-tolerant investor.

Why Upstart Holdings Stock Was Skyrocketing This Week | The Motley Fool

Shares of Upstart Holdings (UPST -2.15%) were surging this week after the company delivered smashing results in its fourth-quarter earnings report. It easily beat estimates on the top and bottom lines and gave strong guidance for 2025. Overall, the report showed an inflection point in the company's business model and technology as its conversion rate jumped, and results improved even in a challenging interest rate environment. As of 12:27 p.m. ET on Thursday, the stock was up 30.6% for the week, according to data from S&P Global Market Intelligence. The AI-based loan-origination platform said revenue jumped 56% to $219 million, which was well ahead of estimates at $181.9 million. Fee revenue, the core of the business, was up 30% to $199.3 million. It also earns revenue from interest income on the loans it facilitates. Growth in revenue was driven by a new AI model, Model 18, that has improved conversion rates or the rate of borrowers who are approved for loans. Upstart's conversion rate rose from 11.6% to 19.3%, and the number of loans it originated nearly doubled to 245,663. That translated into gains on the bottom line as it flipped an adjusted loss per share of $0.11 to a per-share profit of $0.29, which easily topped the consensus at a loss per share of $0.04. Upstart also nearly reported a generally accepted accounting principles (GAAP) profit for the first time in years. Upstart also gave strong guidance for 2025, calling for revenue of approximately $1 billion, an increase of more than 50% from 2024. It also expects an adjusted earnings before interest, taxes, depreciation, amortization (EBITDA) margin of 18%, and GAAP net income of at least breakeven. Upstart is separating itself from the competition with its technology, and it has a massive addressable market to tap into. 2025 is shaping up to be a great year for Upstart. The company also announced its "Upstart AI Day" on May 14, which could be another catalyst for the stock to move higher.

Upstart Holdings Stock Soars as AI Lending Platform Posts Surprise Profit

The artificial intelligence lending platform's current-quarter outlook was better than anticipated. Shares of Upstart Holdings (UPST) skyrocketed 30% Wednesday, a day after the artificial intelligence (AI) lending marketplace posted a surprise adjusted profit and gave strong guidance as transactions soared. Upstart reported fourth-quarter adjusted earnings per share (EPS) of $0.26, while analysts surveyed by Visible Alpha were looking for an adjusted loss per share of $0.03. Revenue jumped 56% year-over-year to $219.0 million, also above forecasts. Transaction revenue was 68% higher to $2.11 billion, and the number of loans soared 89% to 245,663. Co-founder and CEO Dave Girouard said Upstart's "business grew dramatically across all product categories" during Q4. Girouard added that Upstart enters 2025 with "unparalleled energy and optimism for the future of Upstart AI lending and the mission we're on together." The company sees a current-quarter GAAP net loss of about $20 million, and revenue of around $200 million. The Visible Alpha estimates were for a loss of $31.3 million and revenue of $180.5 million. Upstart Holdings shares traded at their highest level since April 2022.

Upstart Stock Is Surging Wednesday: Here's Why - Upstart Hldgs (NASDAQ:UPST)

Upstart Holdings Inc UPST shares are trading higher Wednesday after the company reported better-than-expected financial results and issued strong guidance. Multiple analysts upgraded the stock following the print. Q4 Revenue: $218.96 million, versus estimates of $182.18 million Q4 Adjusted EPS: 26 cents, versus estimates for a loss of 4 cents Total revenue was up 56% year-over-year. Total fee revenue increased 30% on a year-over-year basis. Upstart said it originated 245,663 loans in the quarter, up 68% year-over-year. "In Q4 of 2024, our business grew dramatically across all product categories, delivered Adjusted EBITDA at levels not seen since the first quarter of 2022, and came within a whisker of returning to GAAP profitability," said Dave Girouard, co-founder and CEO of Upstart. "We launched into 2025 with unparalleled energy and optimism for the future of Upstart AI lending and the mission we're on together." Outlook: Upstart expects first-quarter revenue of approximately $200 million versus estimates of $193.8 million, according to Benzinga Pro. The company anticipates first-quarter adjusted EBITDA of approximately $27 million. Upstart sees full-year 2025 revenue of approximately $1 billion. The company anticipates full-year revenue fees of approximately $920 million. Upstart noted that it will host an "Upstart AI Day" on May 14 to discuss the company's technology, business model and strategy. Check This Out: CVS Health Q4 Earnings: Revenue And EPS Beat, Same-store Prescription Volume Up 5.9%, Upbeat FY25 Outlook And More Analyst Changes: Piper Sandler analyst Arvind Ramnani reiterated Upstart with an Overweight and raised the price target from $85 to $105. JPMorgan analyst Reginald Smith upgraded Upstart from Underweight to Neutral and raised the price target from $57 to $79. B. Riley Securities analyst Hal Goetsch upgraded Upstart from Neutral to Buy and raised the price target from $49 to $105. Needham analyst Kyle Peterson maintained Upstart with a Buy and raised the price target from $100 to $108. BofA Securities analyst Nat Schindler maintained Upstart with an Underperform and raised the price target from $33 to $39. UPST Price Action: Upstart shares were up 23.9% at $83.40 at the time of publication Wednesday, according to Benzinga Pro. Photo: Shutterstock. UPSTUpstart Holdings Inc$82.2622.2%WatchlistOverviewMarket News and Data brought to you by Benzinga APIs