Why Upstart Stock Dropped 22% in January
Shares of Upstart Holdings (NASDAQ: UPST) stock fell 22% in January, according to data provided by S&P Global Market Intelligence. There wasn't any significant news, but investors are pessimistic about its chances to improve while interest rates are still in flux
Upstart had been reporting explosive growth and high profitability prior to inflation and the ensuing high interest rates, but that fell off a cliff when demand for loans fell and higher default rates spooked lenders. Upstart operates an artificial intelligence (AI)-powered credit evaluation platform, and it stands out from traditional models because it says its technology can identify credit risk more accurately, resulting in more loans without increased risk. However, in this kind of economic environment, its algorithms can't identify as many candidates for loans.
In the 2023 third quarter, revenue fell 14% from last year, which itself was a steep year-over-year decline. Loan volume decreased 34%, with a 9.5% conversion rate. Net loss improved from $56.2 million last year to $40.3 million this year. It's guiding for a further revenue decline in the fourth quarter, with net loss moderately improved from last year.
Source Fool.com
