Upstart Stock Collapsed This Week. Here's Why.
Shares of Upstart (NASDAQ: UPST) collapsed 31.2%, according to data from S&P Global Market Intelligence. The artificial intelligence (AI) lending platform posted loan volume declines and more net losses, causing investors to sour further on the stock. Once a pandemic favorite, with its stock rising 1,000% in less than a year, Upstart is now down 30% from its IPO price in late 2020.
In the third quarter, Upstart's trends over the last few quarters continued: declining loan volumes and net losses. $1.2 billion was originated through Upstart's loan platform in Q3, down 34% year over year. This led to revenue declines and a net loss of $40.3 million in the quarter. Investors were likely not pleased with either development.
Upstart's platform uses AI to price consumer loans, focusing on personal loans but also expanding into automotive lending and home equity line of credit loans (HELOCs). It makes money from the loans that it helps originate, so lending volumes are a key metric to track for the company. Rising loan volumes will enable the company to earn enough revenue to cover its overhead costs, which is not happening at the moment. Even though it sharply reduced marketing and made some layoffs over the past year, Upstart had $178.4 million in operating expenses vs. $134.6 million in consolidated net revenue. Either revenue needs to grow, or expenses need to come down (or both) in order for this company to generate positive earnings for shareholders.
Source Fool.com
