Upstart (UPST): Examining Valuation Following Recent Share Price Declines

Upstart Holdings (UPST) is coming off a challenging stretch, with the stock down 20% over the past month and nearly 50% over the past year. Investors may be curious about what is driving these moves and where the company stands now.

See our latest analysis for Upstart Holdings.

Upstart Holdings’ share price has struggled for momentum lately, with a harsh 20% drop over the past month and nearly 50% lower total shareholder return over the past year. Although there have been solid three-year total shareholder returns, the recent declines indicate fading optimism and a more cautious outlook from investors as growth expectations are re-evaluated in a volatile market.

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With Upstart trading below analyst price targets despite posting solid three-year returns, the key question now is whether the recent sell-off presents a compelling value opportunity, or if the market has fairly accounted for future prospects.

Most Popular Narrative: 48% Undervalued

Upstart Holdings’ prevailing narrative assigns a fair value to the stock that’s dramatically higher than the current price, highlighting a sharp disconnect in expectations. Investors following this narrative are presented with ambitious projections for growth, margins, and profitability that set the stage for strong upside potential if the numbers are realized.

The implementation of Model 19, featuring the Payment Transition Model (PTM), has improved underwriting accuracy, which is likely to enhance loan approval rates and reduce default risks, positively impacting revenue and net margins. Upstart's HELOC product growth, driven by conversion improvements, cross-selling, and state expansion, positions it well for future revenue growth and margins with the potential to leverage its strong relationships with banks and credit unions for cost-effective funding.

Read the complete narrative.

What’s the secret behind this aggressive price target? It’s tied to a mix of transformative operating upgrades, big margin shifts, and confidence in long-term lending growth. Are these projections realistic or overly bold? Click to unlock the full valuation logic.

Result: Fair Value of $74.69 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent concerns about rising default rates and potential struggles to maintain model accuracy could quickly shake confidence in the current valuation thesis.

Find out about the key risks to this Upstart Holdings narrative.

Another View: Pricing Through Earnings Ratios

While the fair value estimate suggests Upstart may be undervalued, the market's take on its price-to-earnings ratio tells a different story. At 117.1 times earnings, the company's valuation is far higher than both the industry average of 10.5 and the calculated fair ratio of 43. This significant premium suggests the market is pricing in major growth, but also leaves little margin for disappointment if results fall short.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Upstart Holdings Narrative

If you have a different outlook or want to dig deeper into Upstart Holdings' numbers, you can easily create your own evidence-based narrative in just a few minutes as well. Do it your way

A great starting point for your Upstart Holdings research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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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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