Upstart could be worth much more as a fast-growing lending platform


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Assets received (NASDAQ:UPST) is a loan referral fintech company that earns loan referral fees and loan servicing revenue. As I pointed out in my last article on UPST stocks, it is not so much an AI (artificial intelligence) company, but a marketing and services company.

Source: Postmodern Studio / Shutterstock.com

In fact, most of the money she earns comes from introducing and servicing large amounts of consumer and other loans. However, in my last October 2021 article, I was probably too optimistic about the valuation of UPST stock.

Since then, it has gone from a record price of $390 per share on October 15 to a low of $90.13 on January 27, 2022. Now, at noon on February 2, it has risen to over $100 at 105 $.64 and seems to be on the rise.

This article will discuss why UPST stocks should do well in the coming year.

The Steph Curry of the Fintech industry

On November 9, Upstart announced exceptional revenue and earnings for the quarter ending September 30. Revenue from fees, including loan referral and service fees, was $210.4 million, up dramatically from $62.9 million last year. In addition, its interest income rose from $2.5 million last year to $18.0 million in the last quarter.

Despite higher expenses, Upstart had a profitable quarter, including net income of $29.1 million, compared to just $9.7 million last year.

More significantly, the company generated cash operating profit of $179.5 million for the nine months ending Sept. 30. That compares to a cash loss of $52.8 million last year.

So this is a very good quarterly earnings report for the new public company. Additionally, analysts are now very positive on earnings for the coming year. As CEO David Girouard pointed out, they tripled their revenue, profits, and credit unions and banks on their platform. This makes them, with so many three points, the “Steph Curry of the Fintech industry”.

For example, according to Seeking Alpha, 10 analysts surveyed have an average revenue forecast of more than $1 billion in revenue ($1.17 billion) for 2022. This represents a potential 45% increase over forecast revenue. for 2021 of $806.75 million.

Additionally, further down, these same analysts forecast 2023 revenue to climb rapidly to $1.648 billion. So, in just two years from the end of 2021, with revenue projections of $807 million, sales are expected to more than double by the end of 2023.

This means that this company is in huge growth mode. The stock probably doesn’t reflect that now.

Where could the starter stock go

As of Feb. 2, 2022, UPST stock had a market capitalization of approximately $8.93 billion, according to Seeking Alpha. However, Yahoo Finance, which uses Refinitiv data to calculate market cap, says its market value is $8.68 billion.

Using the higher market value, this still puts it on a forward price-sales (P/S) multiple of only 7.6x forecast 2022 sales and 5.4x forecast 2023 sales.

It’s about the same multiples to Sofi Technologies (NASDAQ:SOFI), which has a similar market cap of $10.6 billion and is trading for 7.3x 2022 sales and 5.0x forecast 2023 sales.

However, as I pointed out in a recent article I wrote on SOFI stock, Sofi is not yet profitable or cash positive. Since UPST is highly profitable and has positive cash flow, it deserves a higher comparable valuation.

So I suspect, given the growth trajectory and its continued profitability, that UPST stock is worth at least 50% more than its current price. That puts its value at $158.46 per share, 50% higher than today’s (February 2) price of $105.64.

What to do with UPST stocks

Analysts tend to agree with me on this point. In fact, TipRanks reports that the average price target of nine analysts covering UPST stock is $236.44 or 101% above today’s price. They think Upstart is worth double today’s price, not just 50% like I offered.

I also suspect that once earnings are released for the quarter and year ending Dec. 31, analysts will likely raise their price targets. Therefore, this could be a good point to take advantage of the weakness in the UPST stock price.

As of the date of publication, Mark R. Hake held no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com and execute the Guide to Total Return Value which you can view here.

The Upstart post could be worth a whole lot more as the fast-growing lending platform appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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