Upstart (NASDAQ: UPST), an A.I.-based lending platform, had seen incredible growth of over 600% this year-to-date (YTD). However, investors witnessed a significant downturn of over 20% in pre-market trading this morning following its Q3 earnings report. So naturally the earnings must have missed, right? Well, not exactly.
Upstart reported a revenue increase of 250% year-over-year (YoY) to $228 million. It also comfortably beat analyst estimates with regard to earnings per share (EPS), posting EPS of $0.60 against an expected $0.33. All this points to a rousing success for this quarter’s earnings, and yet the company is still down today. Should investors be worried?
Why does this matter to investors?
Upstart has been one of the true success stories of 2021. Since its IPO, it has tripled revenue, profits, the number of banks and credit unions on its platform, and the number of auto dealerships the company serves. As CEO Dave Girouard quipped, “With that many 3s, Upstart is becoming the Steph Curry of the FinTech industry.”
So considering all of this rampant success, are investors right to worry following this post-earnings pullback? One of the main reasons behind this drop seems to be the company’s forecasted earnings for Q4. Earnings before interest, taxes, depreciation, and amortization (EBITDA) are predicted to be between $51 and $53 million for Q4. This would mean a drop from a reported $59.1 million for Q3 of this year. For a company experiencing such monumental growth, this decline in outlook could be what’s causing some of the bearish sentiments seen on the market today.
Another point to consider is that some investors might have just been happy to take their profits now while the company has performed so well. After such an electric run in 2021, many investors might have cashed in to cement a more than solid win. If this is indeed the case, remaining investors have even less to worry about considering the still strong underlying factors that permeate the business.
Is Upstart still a good investment?
Despite today’s pullback, Upstart remains on course for an outstanding year of trading. It continues to smash almost every conceivable metric for growth and success and doesn’t show many signs of stopping. Savvy investors will no doubt pay attention to today’s price drop and resolve to get to the bottom of it, but many will still see Upstart as an extremely strong addition to any portfolio.
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Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.