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Upstart Earnings Report Preview
In this video, Scotty with Money is discussing Upstart's upcoming earnings report for their first quarter fiscal year 2023. He provides an overview of the company and its current challenges.
Introduction to Upstart
- Upstart is an AI lending marketplace that partners with banks and credit unions to improve access to affordable credit.
- The company has facilitated over $32 billion in loans, with 82% of them being instantly approved and fully automated.
- Upstart's revenue for Q4 2022 was $147 million, down 52% YoY, and operating income was a loss of $58.5 million.
Challenges Facing Upstart
- The company faces headwinds related to the credit crunch and higher interest rates leading to decreased loan volumes.
- As a result of these challenges, Upstart has shown declines in revenue, operating income, and contribution profits.
- The stock price has also reflected these declines, currently trading at just over $12 per share from its all-time high of $409.
Conclusion
- Overall, while Upstart has the tailwind of AI powering their lending marketplace, they are facing significant headwinds in the current economic environment. Investors will be closely watching their upcoming earnings report for insights into how the company plans to navigate these challenges moving forward.
Upstart Holdings Inc. Overview
This section provides an overview of Upstart Holdings Inc., including its valuation, revenue growth, profitability, and addressable market.
Valuation and Revenue Growth
- The speaker advises against investing in Upstart when it was trading at over $30 or $40 million due to its overvaluation.
- Upstart experienced exponential revenue growth from $233 million to over $849 million resulting in the stock price taking off.
- However, more recently, revenues have become stagnant and profitability has turned negative with an operating loss of $114 million reported for last year.
Addressable Market
- Upstart's addressable market is estimated to be over $5 trillion with mortgage lending making up 3.3 trillion 780 billion, auto loans making up 1.62 billion, and small businesses making up 644 billion.
Risk Analysis
- Mortgages and auto loans are considered less risky than personal unsecured lending which is the most risky business a lender can engage in.
- Even though on a FICO score basis a borrower may seem risky to the actual Credit Agencies, according to Upstart they may not necessarily have a high default rate because they use AI to better determine if the default rate is higher.
Upstart Q4 2021 Earnings Report
In this section, the speaker discusses the analysis of risk and credit, revenue, and balance sheet of Upstart.
Analysis of Risk and Credit
- The average credit score is between the highest and lowest credit score.
- Upstart does a lot of analysis with risk and credit.
Revenue
- The revenue for Upstart is discussed.
- The revenue is expected to be $100 million in the next week.
Balance Sheet
- The balance sheet for Upstart is discussed.
- Cash and cash equivalents have come down from about a billion to 532 million.
- Loans notes and residuals are sitting at over 1 billion at fair value.
Decline in Value of Loans on an Unrealized Basis
In this section, the speaker talks about how interest rates affect loans' value on an unrealized basis.
Interest Rates Affecting Loan Value
- As interest rates go up, the value of loans on an unrealized basis starts to come down.
- This becomes a big problem as happened with SVB total assets.
Outlook for Next Week
In this section, the speaker discusses the outlook for next week's earnings report.
Outlook for Next Week's Earnings Report
- Revenue from free $110 million net interest loss of $10 million dollars is expected.
- Contribution margin with a net loss of $145 million dollars is expected.
Technical Analysis of Stock Price Movement
In this section, the speaker analyzes stock price movement using technical analysis.
Stock Price Movement Analysis
- Every time the stock price comes down to $12 per share, buyers step in, and momentum goes back higher for Upstart.
- The overall trend is that Upstart is still declining, making lower highs.
- This is a little bit of a descending triangle as well because we continue to make these lower highs while that support sitting at 12 bucks per share.
Analysis of Earnings Report
In this section, the speaker analyzes the earnings report and discusses potential outcomes.
Analysis of Earnings Report
- If the earnings come in better than what analysts are expecting, maybe the revenue comes in a little bit higher.
- It's going to be quite difficult for Upstart to show us a huge surprise on the upside considering everything known about the economy and recession indicators and interest rates.
- $12 bucks is going to be that support level to watch.
Potential for Future Growth
In this section, the speaker talks about potential future growth for Upstart.
Potential Future Growth
- There is potential for this company with AI and lending business needs to start picking up again moving forward.
- Eventually, if they can survive 23-24 and come out on top on the other side, then there is potential for this company.