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Is UPST Stock a Buy, Hold, or Sell After Its 43.7% Three-Month Rally?

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Key Takeaways

  • Upstart surged 43.7% in three months, outpacing peers in AI-driven lending platforms.
  • Q2 revenue jumped 102% to $257M, with $2.8B originations and a return to profitability.
  • New Auto and Home loan segments grew sharply, making up 10% of quarterly lending volume.

Upstart Holdings, Inc. (UPST - Free Report) has rallied 43.7% in the past three months, outperforming the Zacks Financial – Miscellaneous Services industry’s modest 7.7% gain. While LendingClub (LC - Free Report) posted a bigger jump of 64.2% and Enova International (ENVA - Free Report) rose 29.1%, UPST’s surge underscores its strong momentum and leadership among AI-driven lending platforms.

Notably, Upstart continues to win credit union partnerships. Cornerstone Community Financial Credit Union and ABNB Federal Credit Union recently selected Upstart to power personal loan offerings, reflecting the platform’s growing adoption among community lenders. These partnerships not only diversify funding sources but also reinforce Upstart’s value proposition to financial institutions seeking modern, AI-driven lending solutions.

Still, many investors might be asking whether the recent rally means the opportunity has already passed, or if there’s more upside ahead. The key question now is whether it makes sense to add or initiate a position in UPST, or to wait for a potential pullback.

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What’s Aiding Upstart Stock's Performance?

A Return to Growth and Profitability: Upstart’s second-quarter 2025 results marked a turning point. The company reported $257 million in revenues, up 102% year over year, while loan originations soared to $2.8 billion, the highest in three years. Conversion rates improved to 23.9%, reflecting stronger borrower approvals, while the number of loans originated rose 159% from last year. Upstart achieved GAAP profitability a quarter earlier than expected, with net income of $5.6 million compared with $54.5 million loss a year ago. Contribution profit rose 85% year over year to $141 million, maintaining a healthy 58% margin.

Growth Beyond a Single Quarter: While Upstart’s recent earnings performance is encouraging, its trajectory extends beyond a single earnings print. Over the past year, the company has repositioned itself from survival mode to expansion. Looking ahead, management forecasts full-year 2025 revenue of about $1.05 billion and net income of $35 million, signaling that profitability is not just a one-off event. 

Diversifying Into New Lending Verticals: While personal loans remain the backbone of Upstart’s business, the company’s Auto and Home segments are gaining momentum. Auto originations grew more than sixfold versus last year, while Home originations increased nearly ninefold. Together with small-dollar loans, these new products accounted for more than 10% of quarterly volume.

The AI Advantage: At the heart of Upstart’s story is its AI-driven underwriting engine. The company’s new Model 22, which introduced neural networks at the “meta” layer of its credit model, resulted in a 17 percentage-point boost in separation accuracy versus the benchmark textbook credit model, allowing for higher conversion rates and lower acquisition costs.

Automation also differentiates Upstart, and in the second quarter of 2025, 92% of loans were fully automated, requiring no human intervention. This level of efficiency not only supports scalability but also helps lenders approve more borrowers at lower rates, reinforcing Upstart’s appeal to both sides of the marketplace. Beyond underwriting, Upstart is applying machine learning to loan servicing, where early efforts have already reduced delinquency rates. 

Therefore, despite tackling economic headwinds and rising competition, Upstart Holdings stands out for its disruptive business model and strategic growth initiatives.

UPST’s Estimates Revision and Valuation

The recent estimate revision trends also echo similar sentiments. The full-year 2025 Zacks Consensus Estimate for EPS has been revised upward over the past month. The same for 2026 has also been adjusted above the prior projections.

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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 5.94X, which is at a premium to the industry average of 3.44X. Moreover, compared with fintech rivals, the stock trades at a premium to LendingClub and Enova International. At present, LendingClub and Enova International have P/S multiples of 1.86X and 0.86X, respectively.

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Image Source: Zacks Investment Research

Final Take on UPST

Despite lingering near-term macro uncertainties, Upstart’s unique AI platform, growing diversification across loan products, and strengthening financial profile position it as an attractive long-term fintech opportunity. For investors looking to capitalize on AI-led innovation in consumer lending, UPST stands out as a promising bet.

Currently, Upstart carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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