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Upstart Stock Appreciates 40% QTD: Should You Take the Bait?
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Key Takeaways
UPST stock is up 40.1% QTD, outpacing peers and its industry's 18.7% advance.
AI-led automation, loan diversification, and super-prime focus are boosting performance.
UPST trades at a premium valuation with macro risks and mixed earnings estimate trends.
Upstart Holdings, Inc. (UPST - Free Report) has delivered a strong gain of 40.1% so far in the quarter, significantly outperforming the Zacks Financial – Miscellaneous Services industry’s 18.7% appreciation. In contrast to peers, such as LendingClub (LC - Free Report) and Enova International (ENVA - Free Report) , UPST has clearly emerged as one of the standout performers.
Upstart Holdings stands out for its disruptive business model and strategic growth initiatives, despite tackling economic headwinds and rising competition. UPST is reinventing consumer lending using artificial intelligence.
However, investors may be wondering if they’ve missed the investment opportunity or if there’s still time to take a position. Let's explore further to determine whether it’s wise to consider taking or increasing positions in UPST or waiting for a better entry point.
Image Source: Zacks Investment Research
What's Aiding Upstart Stock's Performance?
Upstart is redefining credit underwriting through the application of artificial intelligence. At the core of its value proposition is a proprietary AI-based model that replaces the traditional FICO score with a more nuanced and predictive system, incorporating factors like education, employment history, and financial behavior. In first-quarter 2025, 92% of loans on its platform were fully automated, demonstrating unmatched efficiency and borrower experience. The company’s superior automation rate, when combined with rising conversion rates (up from 14% to 19% YoY), underlines the tangible benefit of its model advancements.
Upstart’s expansion beyond personal loans into verticals like auto refinancing, HELOCs, and small-dollar loans is paying off. Auto loan originations jumped 42% sequentially, HELOCs rose 52%, and small-dollar loans nearly tripled year over year. This diversification enhances revenue streams while enabling Upstart to test and fine-tune its AI model across product categories. Partnerships like the one with All In Credit Union also show Upstart's growing appeal among traditional lenders looking to reach more borrowers digitally.
Furthermore, its focus on super-prime borrowers — now 32% of originations — reduces credit risk while increasing access to low-cost funding. Its marketplace model has diversified funding across banks, credit unions, and private credit providers, now with more than 50% of volume backed by committed capital.
Upstart’s AI innovation is a sustainable moat. Upstart integrated embeddings into its underwriting system — an advanced machine-learning method that transforms complex, unstructured data into actionable insights, enhancing the precision of credit evaluations. These embeddings enable the model to detect nuanced behavioral patterns among borrowers — for instance, recognizing relationships between different credit card types — thereby improving its ability to generalize and separate risk effectively.
Looking ahead, Upstart intends to debut its first machine-learning model for loan servicing, focused on boosting operational efficiency and lowering default rates, with the broader ambition of developing a distinctive, standalone servicing solution.
Hurdles in Upstart's Growth Journey
However, challenges remain — elevated interest rates and a dip in contribution margins are notable. The growing super-prime borrower mix, while improving credit quality, also results in lower take rates due to intense competition.
Moreover, margins in newer products like HELOC and auto lending are expected to mature over time, with initial take rates being modest due to early-stage scaling. Moreover, macroeconomic uncertainty and trade tensions add to the company’s woes.
UPST’s Estimates Revision and Valuation
The recent estimate revision trends do not provide a clear direction either. While the full-year 2025 consensus mark for EPS has been revised slightly downward over the past week, the same for 2026 has been adjusted above the prior projections.
Image Source: Zacks Investment Research
From a valuation perspective, we note that Upstart shares are currently overvalued, as suggested by the Value Score of F.
In terms of forward 12-month Price/Sales (P/S), Upstart is currently trading at 5.24X, which is at a premium to the industry average of 3.85X. Moreover, compared with major fintech rivals, the stock trades at a premium to LendingClub and Enova International. At present, LendingClub and Enova International have P/S multiples of 1.38X and 0.8X, respectively.
Image Source: Zacks Investment Research
Final Take on UPST
While short-term macro risks remain, Upstart’s differentiated technology, expanding loan mix, and improving profitability make it a compelling long-term fintech play. Investors seeking AI-driven disruption in consumer finance may find Upstart well worth the ride. However, it’s also trading at a relatively high valuation. For now, holding the stock seems like the right move, especially if you have a longer investment horizon.
Image: Bigstock
Upstart Stock Appreciates 40% QTD: Should You Take the Bait?
Key Takeaways
Upstart Holdings, Inc. (UPST - Free Report) has delivered a strong gain of 40.1% so far in the quarter, significantly outperforming the Zacks Financial – Miscellaneous Services industry’s 18.7% appreciation. In contrast to peers, such as LendingClub (LC - Free Report) and Enova International (ENVA - Free Report) , UPST has clearly emerged as one of the standout performers.
Upstart Holdings stands out for its disruptive business model and strategic growth initiatives, despite tackling economic headwinds and rising competition. UPST is reinventing consumer lending using artificial intelligence.
However, investors may be wondering if they’ve missed the investment opportunity or if there’s still time to take a position. Let's explore further to determine whether it’s wise to consider taking or increasing positions in UPST or waiting for a better entry point.
Image Source: Zacks Investment Research
What's Aiding Upstart Stock's Performance?
Upstart is redefining credit underwriting through the application of artificial intelligence. At the core of its value proposition is a proprietary AI-based model that replaces the traditional FICO score with a more nuanced and predictive system, incorporating factors like education, employment history, and financial behavior. In first-quarter 2025, 92% of loans on its platform were fully automated, demonstrating unmatched efficiency and borrower experience. The company’s superior automation rate, when combined with rising conversion rates (up from 14% to 19% YoY), underlines the tangible benefit of its model advancements.
Upstart’s expansion beyond personal loans into verticals like auto refinancing, HELOCs, and small-dollar loans is paying off. Auto loan originations jumped 42% sequentially, HELOCs rose 52%, and small-dollar loans nearly tripled year over year. This diversification enhances revenue streams while enabling Upstart to test and fine-tune its AI model across product categories. Partnerships like the one with All In Credit Union also show Upstart's growing appeal among traditional lenders looking to reach more borrowers digitally.
Furthermore, its focus on super-prime borrowers — now 32% of originations — reduces credit risk while increasing access to low-cost funding. Its marketplace model has diversified funding across banks, credit unions, and private credit providers, now with more than 50% of volume backed by committed capital.
Upstart’s AI innovation is a sustainable moat. Upstart integrated embeddings into its underwriting system — an advanced machine-learning method that transforms complex, unstructured data into actionable insights, enhancing the precision of credit evaluations. These embeddings enable the model to detect nuanced behavioral patterns among borrowers — for instance, recognizing relationships between different credit card types — thereby improving its ability to generalize and separate risk effectively.
Looking ahead, Upstart intends to debut its first machine-learning model for loan servicing, focused on boosting operational efficiency and lowering default rates, with the broader ambition of developing a distinctive, standalone servicing solution.
Hurdles in Upstart's Growth Journey
However, challenges remain — elevated interest rates and a dip in contribution margins are notable. The growing super-prime borrower mix, while improving credit quality, also results in lower take rates due to intense competition.
Moreover, margins in newer products like HELOC and auto lending are expected to mature over time, with initial take rates being modest due to early-stage scaling. Moreover, macroeconomic uncertainty and trade tensions add to the company’s woes.
UPST’s Estimates Revision and Valuation
The recent estimate revision trends do not provide a clear direction either. While the full-year 2025 consensus mark for EPS has been revised slightly downward over the past week, the same for 2026 has been adjusted above the prior projections.
Image Source: Zacks Investment Research
From a valuation perspective, we note that Upstart shares are currently overvalued, as suggested by the Value Score of F.
In terms of forward 12-month Price/Sales (P/S), Upstart is currently trading at 5.24X, which is at a premium to the industry average of 3.85X. Moreover, compared with major fintech rivals, the stock trades at a premium to LendingClub and Enova International. At present, LendingClub and Enova International have P/S multiples of 1.38X and 0.8X, respectively.
Image Source: Zacks Investment Research
Final Take on UPST
While short-term macro risks remain, Upstart’s differentiated technology, expanding loan mix, and improving profitability make it a compelling long-term fintech play. Investors seeking AI-driven disruption in consumer finance may find Upstart well worth the ride. However, it’s also trading at a relatively high valuation. For now, holding the stock seems like the right move, especially if you have a longer investment horizon.
Currently, Upstart Holdings carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.