Shares of
Upstart
were sinking Wednesday after the consumer lending company posted a wider-than-expected loss and issued a dismal outlook for growth.
Despite the stock’s steep decline Wednesday, one analyst on Wall Street was sticking by shares of the artificial intelligence lending platform.
Upstart
(ticker: UPST) reported a third-quarter adjusted loss of 5 cents a share, wider than analysts’ expectations that called for a loss of 2 cents. Revenue fell 14% from a year earlier to $135 million and came in below consensus of $140 million.
Upstart uses artificial intelligence to allow lenders to approve more borrowers. In a conference call, the company reiterated the negative impact of banks being cautious about lending amid an environment of higher interest rates. In the third quarter, Upstart said lending partners originated 34% fewer loans than a year ago.
For the fourth quarter, Upstart said revenue is expected at approximately $135 million, lower than the $157.6 million predicted by analysts. The company had offered a disappointing quarterly outlook in August as well.
The stock fell as much as 30% shortly after the market opened, which would put it on pace for the largest percent decrease since August when it fell 34.24%, according to Dow Jones Market Data. At last check, the stock was down 25% to $22.07.
Out of the 18 analysts tracking the stock, 10 have maintained a Sell rating since mid-September, according to FactSet, while seven say Hold. One analyst, BTIG’s Lance Jessurun, has recommended buying the stock.
After the earnings report, Jessurun stuck with his Buy rating on the stock but cut his target for price by half to $32. In a research note, he wrote that the next few quarters should show similar weakness but given the possibility of the Federal Reserve cutting rates next May “we believe that the macro environment should round the corner … and share price performance should likely follow.”
Wedbush’s David Chiaverini stuck with his Sell rating and $10 target on the stock, calling out the “challenging consumer lending backdrop.”
J.P. Morgan’s Reginald Smith also maintained his Sell rating and lowered his target for price to $26 from $28. He likes the potential of Upstart’s artificial intelligence lending platform but said near term there were weaker trends in the market.
Write to Karishma Vanjani at [email protected].
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