Stocks to buy

Upstart Is Poised to Advance With Solid Earnings and Guidance

In-line with my previous expectations, Upstart’s (NASDAQ:UPST) financial results are continuing to improve rapidly. The company’s fourth-quarter earnings and 2022 guidance came in very strong on Feb. 15, propelling UPST stock much higher.

Source: Postmodern Studio /

Meanwhile, based partly on the firm’s 2022 guidance,  I continue to believe Upstart’s auto business will become very successful, further improving its financial results.

I’m optimistic about firms that provide artificial intelligence for specific sectors. In light of that, the company’s success and the bullish view of multiple Street analysts, I remain very upbeat on Upstart’s long-term outlook.

Impressive Q4 Results and Guidance

Upstart’s fourth-quarter sales jumped an incredible 252% year-over-year (YOY), reaching $305 million. The company reported that its fees climbed 37% versus Q3 to $287 million. In Q4, Upstart’s platform handled 495,000 new loans, representing a huge 301% YOY increase and more than 400,000 new borrowers.

Moreover, the company’s main profitability metrics rebounded considerably versus Q3. Its net income doubled compared with the previous quarter, coming in at $58.9 million. Meanwhile, its EBITDA, excluding certain items, rose 54% quarter-over-quarter to $91 million. In all of 2021, Upstart generated $266 million in cash from operations net of loan transactions.

For Q1, the company expects revenue of $295 million to $305 million. If its revenue comes in at the midpoint of that range, its sales will have jumped 148% YOY, the company reported.

Upstart predicted that its Q1 net income, excluding certain items, would be $50 million to $52 million. That’s way up from $19.9 million during the same period a year earlier. And for all of 2022, Upstart predicts its sales will jump 65% YOY to $1.4 billion.

That 65% YOY increase would be way below the 264% revenue jump the company generated last year. But I believe the discrepancy was likely caused by a combination of several factors, including the company’s conservatism, the law of large numbers and the anticipation of reduced loan demand due to higher interest rates. So I do not view the deceleration indicated by the company’s 2022 sales guidance as a cause for concern.

More importantly, Upstart expects its revenue from auto lending, a sector  the company just entered last year, to be an impressive $1.4 billion in 2022. Encouragingly, the guidance suggests the company’s artificial intelligence (AI) is a good fit for the space. This bodes well for its ability to effectively take market share in the huge mortgage sector, which it plans to enter in 2023.

The Fundamentals Are Still Strong

I continue to believe Upstart’s rapid sales growth suggests its offerings have important comparable advantages and high value for many lenders. Additionally, I’m still convinced that companies such as Upstart that tailor their AI solutions to specific industries, using large amounts of data, will do extraordinarily well over the long term.

Multiple Wall Street analysts were also upbeat on Upstart’s fundamentals following its Q4 earnings report. On Feb. 17, Bank of America’s Nat Schindler raised his rating on UPST stock by two notches, going from “underperform” to “buy.”

Calling the company’s Q4 results a “strong beat,” he thinks the company has “superior profitability.” Schindler also believes its 2022 guidance may be conservative. The analyst set a $255 price target on the name.

Also upbeat was Citi analyst Peter Christiansen , who said Upstart had a “‘Beast-mode’ quarter [that] defied normalization worries.” He called the company’s 2022 sales guidance and its auto revenue outlook “impressive.”

The Bottom Line on UPST Stock

Upstart’s fundamentals and outlook remain very solid, and it should benefit from its continued expansion into other types of lending.

Given these points and the fact that the stock’s market capitalization is right around $10 billion while the company’s balance sheet is pristine, I continue to recommend investors buy UPST stock.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.