Why Upstart Stock Is Plunging Today
Upstart Holdings (NASDAQ: UPST) claims to be making steady progress in developing tools to assess creditworthiness, but its potential clients continue to be slow to sign on. Shares of Upstart lost 25% of their value at the open Wednesday after the company delivered third-quarter results after the bell Tuesday that missed Wall Street's expectations, and guided for lower-than-expected revenues in the fourth quarter.
Upstart uses an artificial intelligence platform to provide banks with credit profiles for would-be borrowers -- a tool that, if successful, could upend the traditional credit-scoring process. But the tool needs time to prove its effectiveness, and Upstart is having a harder time selling its system to lenders in this environment.
Higher interest rates tend to put added financial pressure on borrowers and make lending more dangerous -- and that's the macroeconomic situation that we're in now. In such a climate, lenders are more likely to stick with tried and true credit assessment methods, and less likely to take a chance on something new.
Source Fool.com
