Understanding Upstart’s Newly Added Risk Factors


California-based Upstart Holdings (UPST) is a financial software company that provides artificial intelligence-driven lending platform. It partners with banks to facilitate access to affordable loans.

Let’s look at the company’s financials and understand what has changed in its key risk factors. (See Insiders’ Hot Stocks on TipRanks)

Q3 Financial Results

Revenues of the company rose 250% year-over-year to $228 million in the third quarter of 2021. Further, its adjusted EPS stood at $0.60 per share, as compared to $0.16 in the same quarter last year. The company ended the quarter with $1.2 billion in cash and $649.2 million in debt.

Meanwhile, the number of banks using Upstart’s platform tripled during the quarter, and the banks collectively originated more than $3.1 billion in loans. (See Upstart Holdings stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, Upstart Holdings’ main risk categories are Finance & Corporate and Legal and Regulatory, which account for 51% and 23%, respectively, of the total 79 risks identified for the stock. Recently, the company updated its risk profile with seven new risk factors.

Upstart has informed investors that it entered into capped call transactions with certain counterparties in connection with certain debt securities it issued. It has cautioned that those transactions may have an unfavorable impact on its stock price.

The company has told investors that some of its outstanding debt securities contain provisions that may deter a third-party from acquiring it even when such transaction may be favorable to shareholders. For example, it cited a provision that may require it to increase the conversion rate for holders of convertible notes if it is entering into certain mergers.

Further, Upstart tells investors that it has decided to adopt a digital first workforce model in which most of its employees will work remotely. The company, however, highlights that it has a limited history of operating with a remote workforce. Therefore, it may run into challenges that could prevent it from achieving the anticipated benefits like operational efficiency and cost savings.

The Finance and Corporate risk factor’s sector average is at 51%, compared to Upstart’s 40%. Shares of the company have gained 548% year-to-date.

Analysts’ Take

Following Upstart’s Q3 earnings report, Goldman Sachs analyst Mike Ng reiterated a Buy rating on the stock and raised the price target to $290 from $253. Ng’s new price target suggests 9.77% upside potential.

Consensus among analysts is a Moderate Buy based on 4 Buys, 2 Holds, and 1 Sell. The average Upstart Holdings price target of $309.57 implies 17.18% upside potential to current levels.

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