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Upstart Shares Drop Nearly 20% Pre-Market After Strong Earnings

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by Daniel Shvartsman

Investing.com -- Upstart (NASDAQ:UPST) shares plunged nearly 20% in pre-market trading after the AI-powered loan company posted strong revenue and net income growth, but offered guidance that was less than what the market was looking for.

The company reported revenue of $228M, 250% growth from a year ago and well ahead of analyst estimates for $214M; GAAP EPS came in at $.30/share, and non-GAAP was $.60/share, again well ahead of estimates of $.33/share.

Guidance was also ahead of expectations, with a revenue outlook of $255-$265M vs. a current forecast of $227.6M for Q4, and an adjusted earnings outlook of $.51/share vs. $.20/share expectations.

For all that, the stock has traded much lower in the initial reaction. Adjusted EBITDA guidance is for $51-$53M, below this quarter’s $59.1M mark, which along with the lower adjusted earnings outlook may be part of the issue, especially as Q4 is a seasonally strong quarter for Upstart around holiday demand.

It may also be market gravity, as Upstart has become a favorite of both growth and momentum investors. Shares were up nearly 200% from this summer’s lows and, even at the pre-market levels, are up 1170% from last year’s IPO price. Upstart trades at 30x P/S using the high end of their 2021 guidance.

“Since Upstart's IPO a year ago, we've more than tripled our revenue, tripled our profits, tripled the number of banks and credit unions on our platform, and tripled the number of auto dealerships we serve,” said Dave Girouard, co-founder and CEO of Upstart. "With that many 3s, Upstart is becoming the Steph Curry of the FinTech industry."

Analysts have yet to weigh in en masse, though Bank of America maintained an underperform rating and dropped the price target to $255/share in the immediate aftermath. Shares are trading around $253 pre-market, more than 19% off of yesterday's close.

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