Upstart Holdings’ 4Q Results Exceed Expectations; Shares Skyrocket Pre-Market

Shares of Upstart Holdings jumped 45% in the pre-market session as the artificial intelligence (AI) lending platform’s fourth-quarter earnings surpassed analysts’ expectations. The 57% rise in lending volumes was the primary driver.

Upstart Holdings’ (UPST) 4Q adjusted earnings of $0.07 per share topped the Street estimates of $0.02 per share but declined 30% on a year-over-year basis. Total revenue surged 39% to $86.7 million and surpassed the consensus estimate of $74.06 million.

The company’s adjusted EBITDA was $15.5 million in the quarter, up 123% year-over-year. Total operating expenses came in at $76.3 million, up 29%.

Upstart Holdings CEO Dave Girouard commented, “We believe virtually all lending will be powered by AI in the future, and we’re in the earliest stages of helping our bank partners successfully navigate that transformation.” (See Upstart Holdings stock analysis on TipRanks)

For 2021, revenue is anticipated to be $500 million, versus the consensus estimate of $354.3 million.

For the first-quarter of 2021, the company expects adjusted net income to be in the range of $13.4 million to $14.2 million. Total revenue is forecasted to be in the range of $112 million and $118 million, higher than the consensus estimate of $73.78 million.

Additionally, Upstart inked a deal to snap up Prodigy Software, a provider of cloud-based automotive retail software. With this acquisition, Upstart will accelerate its efforts to offer AI-enabled auto loans through the tens of thousands of auto dealers nationwide, the company said. The deal is likely to close in the second quarter of this year.

JMP Securities analyst Ronald Josey upgraded the stock to Buy from Hold and maintained a price target of $111 (82.6% upside potential) after the company’s “Q4 earnings beat – the first quarterly results as a public company.”

Josey “is positive on Upstart’s AI-based credit decisioning platform market share gains, improving conversion rates, accelerating loan requests accelerate, expanding bank partnerships, and new products launches.”

“While valuation had kept him on the sidelines historically, Upstart’s business is operating extremely well coming out of Q4,” the analyst added.

The rest of the Street is sidelined on the stock with a Hold consensus rating based on 1 Buy and 5 Holds. The average analyst price target of $59.20 implies 2.6% downside potential to current levels. Shares have gained 38.2% so far this year.

According to TipRanks’ Smart Score system, Upstart Holdings gets a 6 out of 10, which indicates that the stock is likely to perform in line with market averages.

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