In a year of historically wild stock moves, often sparked by chatter on Reddit boards, financial software company Upstart Holdings is the youngest company to hit inexplicable highs.
Upstart was founded in 2012 by former Google manager David Girouard and went public in December. After making its market debut, Upstart was valued at $ 2.1 billion. After jumping 171% in the last three trading sessions, the company is now worth more than $ 12 billion.
Upstart’s rally, including a 32% jump on Monday, is reminiscent of stocks like GameStop and AMC that fell in January due to the r / WallStreetBets message board on Reddit and a ton of momentum buying from Robinhood and other consumer apps have shot up.
There were a few posts about Upstart on the WallStreetBets forum, including one that said “Let’s take this to the moon” in the subject line. However, they have been removed by content moderators for a variety of reasons, “including ensuring safety, civility and the community’s pursuit of their purpose”.
However, unlike companies run by Reddit, Upstart received an initial jolt from some actual positive news. After the market closed on Wednesday, Upstart saw fourth quarter revenue grow 39% year over year to $ 84.4 million and said operating income nearly tripled to $ 10.4 million. Upstart was forecasting revenue of $ 112 million to $ 118 million for the first quarter, an increase of around 80% in the middle of the range.
Upstart stock rally
It was a general blow, but Refinitiv says fewer than five analysts cover the company, so comparisons with estimates aren’t particularly reliable. Regarding the upcoming acceleration in the first quarter, CFO Sanjay Datta said in the earnings call that the company is “catching up where we would otherwise have expected it if the pandemic had never had an impact”.
Upstart uses machine learning to draw consumer loans and makes its technology available to banking partners who use it for more targeted underwriting. The company announced that its revenue for the quarter came from issuing nearly 124,000 loans. Some demand fell last year due to the financial difficulties of Covid-19.
As Barclays analysts tried to keep up with the latest market reaction, they raised their price target from $ 58 to $ 110 on Friday, a 90% increase. However, this was below the closing price of $ 115.09 the previous day. The analysts therefore retained their hold recommendation for the share.
“We assume that the rapid growth will continue as the company enters new industries and sales channels. However, the valuation keeps us on the sidelines as we wait for a more attractive entry point,” write the Barclays analysts.
The stock now trades for more than 50 times its 2020 sales.
Upstart isn’t the first newly listed company to hit the market in the months following its debut. Palantir, a data analytics software provider for intelligence and large corporations, went public in September via a direct listing priced at $ 10 per share and began ramping up a few months later, peaking at $ 39 in January. The stock has since fallen to $ 24.22 at the close of trading on Monday.
Upstart did not immediately respond to a request for comment.
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