On Monday (NASDAQ:MNDY), Mizuho (NYSE:MFG) raised the price target for Upstart Holdings Inc (NASDAQ:UPST) to $90 from the previous $48, while maintaining an Outperform rating on the stock. The adjustment followed Upstart's positive performance in the third quarter, which demonstrated a significant improvement in market sentiment towards the company.
The analyst from Mizuho cited several key factors contributing to the more optimistic outlook. Upstart's third-quarter results showed a 43% quarter-over-quarter increase in volumes. Additionally, a decrease in the Unsecured Monthly Installment (UMI) by 1.3% month-over-month in September was seen as a positive indicator.
The company also increased its fourth-quarter guidance, projecting revenue from fees to reach $185 million, up from the prior estimate of $165 million.
The upbeat sentiment is further bolstered by the potential impact of Upstart's artificial intelligence models, which are expected to perform well in the current lower rate environment. Furthermore, the anticipated more business-friendly stance of the Trump administration is seen as a potential benefit for the company.
Mizuho's revised estimates are based on these recent developments and the firm's confidence in Upstart's continued strong performance. The analyst expressed a positive outlook for Upstart's future, highlighting the company's effective use of AI technology and favorable market conditions. The higher price target reflects expectations of the company's sustained growth and the potential for increased profitability.
In other recent news, Upstart's expansion into the auto loan and home equity line of credit (HELOC) markets has shown promising results. The HELOC business doubled, and auto loan originations increased by 46%. Upstart also secured a strategic partnership with Blue Owl, which guarantees up to $2 billion in loan purchases over the next 18 months.
On the analyst front, BTIG upgraded Upstart's stock rating from Sell to Neutral. This adjustment reflects the positive performance of Upstart's loan volumes and the potential for accelerated volume growth. However, BTIG maintains some reservations about the company's operations while acknowledging the significant increase in the company's stock value.
These recent developments underscore Upstart's ongoing commitment to growth in the lending sector.
InvestingPro Insights
Upstart Holdings Inc's recent market performance aligns with Mizuho's optimistic outlook. According to InvestingPro data, the company has shown a remarkable 288.12% price total return over the past year, with a significant 71.46% return in just the last week. This surge has brought Upstart's stock price to 98.48% of its 52-week high, trading at $81 as of the previous close.
InvestingPro Tips highlight that six analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Upstart's financial prospects. This aligns with Mizuho's increased price target and the company's improved guidance. However, it's worth noting that analysts do not anticipate the company will be profitable this year, which investors should consider alongside the positive momentum.
The company's revenue growth of 10.89% over the last twelve months and a quarterly growth of 20.13% in Q3 2024 support Mizuho's observations about Upstart's improving performance. While the company is not currently profitable, with an operating income margin of -27.86%, the strong revenue growth and market enthusiasm indicate potential for future profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Upstart Holdings Inc, providing a deeper understanding of the company's financial health and market position.
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