Assessing Upstart Holdings After 26% Drop and New AI Lending Partnerships

• If you have ever wondered whether Upstart Holdings is fairly priced or if there is hidden value waiting to be uncovered, you are in the right place.
• The stock has been on a wild ride lately, down 4.2% in the last week and off a steep 26.4% this month. Zooming out, Upstart is still up 100.3% over three years, despite a 39.0% year-to-date drop and nearly 50% dip over the last twelve months.
• Recent headlines have spotlighted Upstart's evolving partnerships with banks and its continuing push into AI-powered lending. These are two factors reshaping both its market narrative and risk profile. Investors are watching closely as the company has announced tech rollouts aimed at broadening its lending platform, which may be stirring up both optimism and uncertainty.
• When it comes to traditional valuation checks, Upstart scores just 1 out of 6 for being undervalued. We will walk through several approaches to valuation next, but stick around as the best way to understand what Upstart could really be worth is still to come.

Upstart Holdings scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Upstart Holdings Excess Returns Analysis

The Excess Returns valuation method helps investors judge how efficiently a company is turning invested capital into profits after accounting for the cost of equity. This model shines a light on the company's underlying earnings power relative to its book value and helps pinpoint whether future growth will create additional value for shareholders.

For Upstart Holdings, here is the breakdown:

• Book Value: $7.65 per share
• Stable EPS: $2.89 per share (Source: Weighted future Return on Equity estimates from 5 analysts.)
• Cost of Equity: $1.00 per share
• Excess Return: $1.89 per share
• Average Return on Equity: 26.20%
• Stable Book Value: $11.05 per share (Source: Weighted future Book Value estimates from 2 analysts.)

Based on these numbers, Upstart's estimated intrinsic value using the Excess Returns model is $43.62 per share. With the stock trading approximately 15.0% below this intrinsic value, the model currently points to the stock being undervalued.

Result: UNDERVALUED

Our Excess Returns analysis suggests Upstart Holdings is undervalued by 15.0%. Track this in your watchlist or portfolio, or discover 924 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Upstart Holdings.

Approach 2: Upstart Holdings Price vs Earnings

The Price-to-Earnings (PE) ratio is often used by investors to value companies that are profitable, as it links the company’s stock price to its earnings. For companies like Upstart Holdings, which are generating positive earnings, the PE ratio is a useful snapshot of how much investors are willing to pay for each dollar of profit.

What counts as a “normal” or “fair” PE ratio can differ widely depending on investors’ expectations for future growth and the perceived riskiness of a company’s business model. Companies with rapid growth potential, for instance, can support higher multiples, while those facing uncertainty or cyclical risks typically trade at lower figures.

Presently, Upstart Holdings trades at a lofty PE multiple of 112.0x. That stands in stark contrast to both the Consumer Finance industry average of 9.7x and its peer group’s average of 7.4x. On the surface, this huge gap might raise eyebrows, but it is important to adjust for unique traits like growth, margins, and risk.

This is where Simply Wall St’s proprietary “Fair Ratio” shines. The Fair Ratio for Upstart, currently calculated at 43.5x, goes beyond simple peer or industry averages. It takes into account not just financial results, but also anticipated earnings growth, operating risks, profit margins, industry dynamics, and the company’s market cap. This tailored approach offers a more nuanced benchmark for what multiple Upstart genuinely deserves.

Comparing Upstart’s actual PE of 112.0x with its Fair Ratio of 43.5x reveals a significant premium. By these measures, Upstart’s stock appears overvalued when judged by the preferred PE multiple.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1422 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Upstart Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your unique investment story for a company, built around your own expectations, assumptions, and understanding of what drives its future. Instead of relying solely on numbers and models, Narratives connect the company's real-world story and outlook to your financial forecast and fair value estimate. This approach makes it much easier to visualize your thesis and test it against evolving data.

Narratives are an accessible tool, available for everyone on Simply Wall St’s Community page, and used by millions of investors to translate their view of a business into actionable numbers. They help you make smarter buy or sell decisions by directly comparing your personal fair value with the current share price. Factors like news, new quarterly results, or macro events are tracked and reflected automatically, keeping your Narrative up to date.

For example, with Upstart Holdings, some investors think its rapid tech innovation and expanding partnerships could justify a fair value above $105. More cautious users focus on risk and price in just $20, so your Narrative gives you a clear, dynamic framework to anchor your own investment decisions as new information arrives.

Do you think there's more to the story for Upstart Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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