Upstart has dropped nearly 90% from its high. Has the fintech finally become a buy?

The release of weak earnings earlier this month brought one-time high-flier Upstart (NASDAQ:UPST) to a new 52-week low. Shares have bounced off that nadir recently, but the AI lending platform remains almost 90% off the all-time high it reached late last year.

With interest rates rising and consumer spending patterns changing, has the fintech boom passed for good? Or has the sharp decline in UPST in the past several months made the stock a buy?

Mounting Macro Concerns

On May 9, Upstart (UPST) reported Q2 results that missed expectations. The company also issued a weak forecast, saying “this year is shaping up to be a challenging one for the economy.”

Shares dropped 56% in the session immediately after the release of its quarterly report, following that up with another 17% decline the next day. From there, the stock has seen volatile action, as investors fluctuate between bouts of hope and renewed concern.

In the 12 sessions since that initial post-earnings selloff, UPST has posted a double-digit percentage move in half of them. That list includes Friday, with the stock posting a gain of 14% in intraday action. Ten of the 12 sessions have experienced moves of at least 6% in one direction or the other.

Looking longer-term, UPST came public in December of 2020 at a price of $20. Amid a general clamor for fintech stocks in 2021, shares surged to an all-time high of $401.49 in October.

However, the stock suffered severe selling pressure for the rest of 2021 and into early 2022. Rising interest rates put pressure on stock valuations and investors worried about how the company would fare with a potential recession threatening.

The May earnings report sparked another step lower. The stock dropped to a 52-week low of $25.43 — coming back within sight of its $20 IPO price.

Is UPST a Buy?

Given UPST’s sharp decline and alarming financial figures, some high-profile investors have given up on the stock. For instance, Dan Loeb’s Third Point revealed in a regulatory filing earlier this month that it has exited its position in the fintech.

Meanwhile, some analysts have given up on their bullish views on the stock. In the wake of its quarterly report, Atlantic Equities was among the analysts shaken in their upbeat view of UPST, downgrading it to Neutral from Overweight. The firm also cut its price target to $45 from $245.

Citi had a similar reaction to the firm’s earnings report, downgrading it to Neutral and severely curtailing its price target, which it slashed to $50.

Analyst Peter Christiansen said it was “time to adjust to deteriorating macro” and consider key questions like whether consumer credit will deteriorate and whether funding sources will “temper their appetite.” He also wondered if UPST had cut its outlook enough, contending that some of the firm’s balance-sheet decisions “[raise] an eyebrow.”

Looking at the general Wall Street community, analysts are generally split on the stock. Two experts have a Strong Buy rating, while one has issued a Buy rating. This is offset by two analysts with a Sell or Strong Sell opinion. At the same time, eight have issued a Hold rating.

Meanwhile, quantitative measures point to a much more bearish situation. Seeking Alpha’s Quant Ratings views the stock as Strong Sell, giving UPST an F for valuation, profitability and momentum. This is slightly offset by an A+ for growth.

For more on the cautious outlook for UPST, see a report from Seeking Alpha contributor Investi Analyst, which outlines three risk factors that it thinks investors have ignored. On the bullish side, see why fellow SA contributor BeanKounter Capital added to its UPST position following the earnings “bloodbath.”