Why Upstart Holdings shares rose 36% in May
Holdings reached (NASDAQ: UPST) the stock rose 36% in May, according to data provided by S&P Global Market Intelligence. These rapid gains are due to the company beating analysts’ first quarter earnings estimates and significantly raising its outlook for fiscal 2021.
Based in San Mateo, California, and founded by former employees of Alphabetis google (NASDAQ: GOOG) (NASDAQ: GOOGL), Upstart is a lending platform that uses artificial intelligence to estimate what it calls the “real risk” for anyone taking out a consumer loan. He works with financial institutions, essentially acting as a technological intermediary between the people who buy and sell loans to each other.
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On May 11, Upstart released its financial results for the first quarter of 2021. Revenue increased 90% in the first quarter to $ 121 million, while non-GAAP (adjusted) earnings per share (EPS) were $ 0.22 for the quarter, beating consensus analysts’ estimates of $ 0.15. Management also provided its financial outlook for the second quarter of 2021, ranging between $ 150 million and $ 160 million. Finally, it raised its revenue forecast for the entire year from $ 500 million to $ 600 million.
This big step forward in 2021 revenue expectations was probably the main reason Upstart stock soared after the earnings report. It also caused analysts at Citigroup, Jefferies and Piper Sandler to raise all of their share price targets. This searing revenue growth shows the strong value proposition the Upstart platform has for its financial partners and individual consumers as it tries to take market share in the consumer loan market of 1,500. billions of dollars.
Upstart investors have performed well since its IPO late last year, with shares rising over 450% in that short span of time. However, these gains are accompanied by an increasingly higher valuation. The stock is trading at a forward price-to-sell (P / S) ratio of around 18.8 and a forward price-to-earnings (P / E) ratio of 238 based on analysts’ estimates for 2021. Upstart is growing rapidly and continuing to blow up all expectations, so this high valuation should drop quickly, but there is no way around the current share price.
There seems to be no reason to sell your shares in Upstart. The business is running at full speed and continues to impress. But if you’re planning on building a position after that last earnings report, it might be a good idea to be patient and slowly buy stocks over time, reducing the impact that short-term volatility could have on. your investment.
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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Brett schafer has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Jefferies Financial Group Inc., and Upstart Holdings, Inc. The Motley Fool has a disclosure policy.
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