The stock market experienced a significant downturn on Wednesday, primarily driven by an inflation report that was hotter than analysts had anticipated. However, lending technology company Upstart (UPST 27.41%) stood out as a remarkable exception to this trend. As of 9:50 a.m. ET, Upstart’s stock price surged over 30% for the day, showcasing the market’s enthusiasm for its performance amidst broader financial challenges.
Exceptional Earnings Performance and Positive Future Outlook
The primary driver behind Upstart’s impressive stock performance was its latest earnings report, which exceeded expectations across the board. The company reported a staggering 56% year-over-year increase in revenue, showcasing its strong market presence and operational efficiency. Notably, Upstart achieved profitability on an adjusted basis, a significant turnaround compared to the loss incurred in the same quarter the previous year. This remarkable financial turnaround has instilled confidence in investors and highlighted the company’s robust business model.
Additionally, Upstart’s loan platform demonstrated outstanding performance, with a remarkable 68% year-over-year growth in loan volume, reaching an impressive total of $2.1 billion. The platform’s conversion rate has significantly improved, indicating that a greater percentage of applicants are successfully securing loans, which further illustrates the effectiveness of Upstart’s innovative lending technology.
Perhaps even more compelling for investors is Upstart’s guidance for 2025, which significantly surpassed market expectations. Management anticipates achieving approximately $1 billion in revenue, marking a record high for the company. Furthermore, they expect to grow adjusted earnings while aiming for at least breakeven on a generally accepted accounting principles (GAAP) net income basis—a milestone that Upstart has not achieved since 2021. This optimistic guidance signals strong future potential for the company.
Exploring Vast Growth Potential in the Lending Market
It is crucial to recognize that Upstart has substantial opportunities to expand its personal loan origination business further. The personal loan market is estimated to be around $155 billion, while Upstart’s current annualized volume stands at approximately $8 billion based on figures from the fourth quarter. This indicates that Upstart is only scratching the surface of its potential in this lucrative market.
Moreover, Upstart is not limited to personal loans; it also plays a significant role in originating auto loans and home equity lines of credit (HELOCs). These segments could prove to be vital growth drivers for the company. In the fourth quarter, auto loans and HELOCs accounted for just over 3% of Upstart’s overall volume, yet they experienced impressive growth rates of 61% and 59%, respectively, over the last quarter alone. Given that the auto loans market is estimated at $677 billion and U.S. homeowners possess approximately $35 trillion in home equity, there is immense potential for Upstart to scale its operations within these sectors, positioning itself for substantial growth in the coming years.
Matt Frankel has positions in Upstart and has the following options: short December 2025 $95 calls on Upstart. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy.
