Since October 2021 Upstart stock has seen a decline of over 96%. Could now be a potential time to buy?
On the 15th of October 2021, Upstart holdings stock was priced at $401.32. Since that, shares have tumbled over 69% to a value of just $16. Earnings for Q4 are due Tuesday after the bell and there is a lot investors need to take into consideration holding suck a stock.
At its peak on October 21, upstart had a valuation of around $30bn, with revenues of $850m and net profits of around $135m. It was evident that this was a high-growth stock, however, the inexperience of some investors may have left them holding shares at high prices not understanding the market upstart dealing in, AI & Lending. While AI is good and it is the future, this can help justify future business and future development for Upstart however, lending is where it gets tricky.
Higher interest rates mean a squeeze on affordability and the need to lend. As a result, this has been seen in 2022 and revenue has consistently declined along with losses in Q2 & Q3. 2022 revenue looks to take a hit as well as profit margins. This is now what investors want to see. "These higher financing costs and the general scarcity of available capital has contributed to the volume pressure on the business," said Sanjay Datta, the CFO of Upstart, it's even evident from the management that tough times are ahead with higher interest rates and a tougher cost of living.
Expect revenue is $156.1 with a net loss of -0.18 EPS. This would mean that Upstart. A beat on numbers could see the stock recover but given its current valuation of $1.3bn it's somewhat fairly valued in our eyes but could be worth more if numbers are a little better and the company can prove that despite higher interest rates and economic fears, lending is still robust.
Technicals
Whichever timeframe you look at the trend is negative and there isn’t really a ‘bottom’ in the stock right now. There has been a good retracement this year with the stock recovering some 25% from its lows, but the earnings this week could prove risky or provide the a lifeline the stock needs to continue its short-term uptrend. Towards the upside, there is some good scope for a solid return. The initial target would be $18 followed by a gap up and break higher to the yearly highs of $25.70. If earnings are better or losses are not as bad, then upstart has the potential to jump higher. Towards the downside, initial support sits at $15.50 followed by $15.05, $12.94 and then the lows at $11.94. The Risk to reward could be worth it as the upside potential is 70% in the short term with downside potential at 25%.
Short interest in the stock is also around 40% so a jump higher could see people buy back their stock at higher prices, causing a larger rally.
