Last Update 13 Dec 25

UPBD: Accelerated Depreciation Windfall Will Drive Near-Term Cash Flow Upside

Narrative Update on Upbound Group

The analyst price target for Upbound Group has been raised significantly from $21 to $36 per share as analysts point to stronger near term earnings prospects driven by continued growth at Acima and Brigit, along with an expected cash windfall from accelerated depreciation benefits.

Analyst Commentary

Bullish analysts view the recent price target increase as a validation of Upbound Group's improving earnings trajectory and the durability of its growth drivers. Meetings with management have reinforced confidence that the company can translate momentum at Acima and Brigit into higher profitability and stronger free cash flow generation over the next several years.

The accelerated depreciation provisions embedded in recent tax legislation are seen as a significant, though temporary, tailwind to cash flow. Analysts argue that this cash benefit, when combined with operating leverage from scaling volumes, supports a higher valuation multiple than the stock has historically commanded.

While the tone of recent commentary is largely constructive, some market participants remain guarded about execution risk and the sustainability of current growth trends, particularly once tax related benefits normalize. There is also ongoing scrutiny of the underlying credit performance and unit economics within the Acima and Brigit portfolios, which will be key to justifying the upgraded price target and preventing future estimate cuts.

Bullish Takeaways

Bullish analysts highlight that sustained growth at Acima and Brigit, coupled with operating leverage, could drive earnings above prior expectations, supporting the move to a higher price target.
The expected cash windfall from accelerated depreciation is viewed as a catalyst for balance sheet flexibility, potentially enabling debt reduction, targeted investment, or shareholder returns that underpin valuation upside.
Improved visibility into near term earnings has led some to argue that the current share price underestimates Upbound's execution capability and the durability of its key growth engines.
Management's messaging in recent meetings has increased confidence that the company can manage risk in its lease to own and financial technology segments while still pursuing measured expansion.

Bearish Takeaways

Bearish analysts question whether the growth rates at Acima and Brigit are fully sustainable, noting that any slowdown could put pressure on the newly raised price target and compress valuation multiples.
There is concern that a portion of the upside case is driven by tax related depreciation benefits that are inherently temporary, which could create a step down in cash flow once these provisions roll off.
Some remain cautious on credit quality and consumer health within Upbound's end markets, warning that a weaker macro backdrop could heighten loss rates and weigh on margin performance.
Execution risk around scaling technology platforms and integrating risk management controls is seen as a potential source of volatility that could lead to earnings misses and renewed skepticism from investors.

What's in the News

Upbound Group reported that between July 1 and September 30, 2025, it repurchased no additional shares, effectively completing its previously announced buyback with a total of 8,072,776 shares repurchased for $265.16 million, representing 13.41% of shares outstanding (Key Developments).
The company announced that Hal Khouri will join Upbound Group as Chief Financial Officer effective November 10, 2025, transitioning CFO responsibilities from CEO Fahmi Karam and bringing more than 30 years of experience in consumer finance, leasing, and retail to the role (Key Developments).
Management issued updated guidance for the fourth quarter of 2025, indicating expectations for same store sales to be flat to slightly positive and signaling a stabilizing revenue trajectory across the portfolio (Key Developments).

Valuation Changes

Fair Value Estimate: Unchanged at approximately $31.38 per share, indicating no revision to the intrinsic value assessment.
Discount Rate: Stable at 12.5%, reflecting an unchanged view of Upbound Group's risk profile and required return.
Revenue Growth: Effectively unchanged at about 6.01% annually, with only an immaterial rounding adjustment in the model.
Net Profit Margin: Remains steady at roughly 5.97%, with no meaningful shift in long term profitability assumptions.
Future P/E: Holds at about 8.09x, signaling no change to the forward earnings multiple applied in the valuation framework.

Expansion through new Acima Credit products and merchant partnerships is set to widen customer base and increase revenue.
Technology investments and operational streamlining aimed at enhancing customer experience and efficiency may boost profitability.
Legal and economic challenges, along with competitive pressures and reliance on merchant partnerships, could impact revenue growth and operational costs.

Catalysts

About Upbound Group

Upbound Group, Inc. leases household durable goods to customers on a lease-to-own basis in the United States, Puerto Rico, and Mexico.What are the underlying business or industry changes driving this perspective?

The introduction of the Acima Classic Credit General-Purpose Mastercard and the Acima Private Label Credit Cards, through the partnership with Concora, is expected to expand offerings and financial access for customers, potentially driving increased revenue and customer base expansion.
Persistent focus on merchant growth, especially with the 10% increase in merchant partners and the addition of notable partners such as Purple mattress and iFIT, is likely to fuel GMV growth impacting revenue positively.
The integration of the Acceptance Now business into Acima's decision engine is aimed at improving underwriting capabilities, potentially leading to lower lease charge-off rates, impacting net margins positively.
Investments in technology and digital channels, highlighted by the launch of RecPad and the new e-commerce platform, are expected to enhance customer experience and operational efficiency, potentially boosting revenue and reducing operational costs.
Rent-A-Center's store optimization and consolidation efforts, including the closure of underperforming stores and enhancement of digital channels, are intended to optimize scale and productivity, thereby potentially improving adjusted EBITDA margins.

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Upbound Group's revenue will grow by 3.9% annually over the next 3 years.
Analysts assume that profit margins will increase from 1.9% today to 5.8% in 3 years time.
Analysts expect earnings to reach $278.5 million (and earnings per share of $5.08) by about January 2028, up from $81.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $353.9 million in earnings, and the most bearish expecting $210.3 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.3x on those 2028 earnings, down from 20.4x today. This future PE is lower than the current PE for the US Specialty Retail industry at 16.3x.
Analysts expect the number of shares outstanding to grow by 0.06% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.78%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

The ongoing lawsuit filed by Acima leasing against the CFPB could present regulatory and legal challenges, potentially impacting operational flexibility and increasing legal costs.
A rise in unemployment or deterioration in economic conditions could lead to higher lease charge-offs and delinquencies in both the Acima and Rent-A-Center segments, affecting net margins.
The competitive landscape may intensify, especially in the e-commerce channel, putting pressure on growth rates and possibly affecting revenue.
The company's reliance on continued merchant partnership growth for Acima's GMV increases might be at risk if macroeconomic conditions worsen or if competition becomes fiercer, potentially impacting revenue growth.
Operational challenges in integrating newly acquired stores or partners, particularly relating to optimizing underwriting and account management, could result in increased operational costs and affect net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $41.11 for Upbound Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $50.0, and the most bearish reporting a price target of just $33.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.8 billion, earnings will come to $278.5 million, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 8.8%.
Given the current share price of $30.27, the analyst's price target of $41.11 is 26.4% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on Upbound Group?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

UPBD: Near-Term Earnings Momentum And Cash Windfall Will Drive Future Upside