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Should Investors Worry About Upstart’s Recent 200%?

Up almost 200% in 3 days, is Upstart just another ‘short-squeeze’ or is there justification behind its rapid growth?

It’s easy to look at massive gains in a short space of time and end up buying at the top, but it’s just as easy to be suspicious of such moves and miss out. 

Is Upstart’s (NASDAQ: UPST) recent run a case of the former or the latter?

Just getting (up)started?

Shares in the financial software vendor closed at a record $164.87 yesterday, marking a 171% jump in just 3 sessions. In fact, since going public in December with a valuation of $2.1 billion, it has gone from strength to strength and is now valued at $12 billion. Many are looking at this recent performance and thinking: 

“Is this GameStop all over again?”

After all, there have been whispers about Upstart on the r/WallStreetBets message board on Reddit. 

Such an assumption could be premature though, as Upstart is enjoying a deserved purple patch right now following an impressive first-ever quarterly earnings call last Wednesday:

  • Revenue: $84.4 million (+39% year-over-year (YoY))
  • Operating income: $10.4 million (~+300% YoY)
  • Adj. EBITDA: +123% YoY
  • Q1 ’21 revenue guidance: $112 million to $118 million (+80%) 

These numbers aside, the real game-changer for Upstart is its acquisition of Prodigy Software, a provider of cloud-based automotive retail software. The almost half-a-trillion-dollar U.S. automotive industry is suffering from a serious lack of buy-now-pay-later opportunities. Through its Prodigy acquisition, Upstart suddenly has a chance to become a leading player in the lucrative space. 

So, before you dismiss Upstart as just another stock caught in ‘the squeeze’ (or before buying solely because you believe it to be a quick buck), you should take a look at its fundamentals and the growth potential for its auto financing business.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here