1 Outstanding Growth Stock Down 76% Buy Now
JIt’s been a lousy year for growth stock investors. the iShares S&P 500 Growth ETF has fallen 16% since the start of 2022.
Rising interest rates aimed at curbing runaway inflation were already making markets nervous about highly valued growth stocks. To make matters worse, Russia’s invasion of Ukraine disconnected both countries from the global economy. As is often the case when markets fall, even stocks of great companies with promising futures have lost significant ground.
Today I’d like to tell you about a fintech stock that’s fallen around 76% from its peak last fall and is now looking like a bargain.
Upstart Holdings is a high-growth stock that has fallen deep into value territory
Shares of Assets received (NASDAQ: UPST) reached unimaginable heights after its market debut at the end of 2020. When times get tough, however, stocks that already have years of growth tend to fall very quickly. At its peak, the market valued this company at over $30 billion. Now, its market cap is just under $8 billion.
You wouldn’t know it by looking at Upstart’s stock chart, but this innovative fintech company is growing by leaps and bounds. Last year, total revenue jumped 264% to $849 million.
Upstart operates a lending platform complemented by artificial intelligence (AI) algorithms. By incorporating more data points than the old Just Isaac FICO scores that banks and credit unions typically use to assess individual credit risk, Upstart finds creditworthy borrowers who might have fallen through the cracks.
Lenders pay upfront fees and a percentage of future payments to Upstart, but the company rarely keeps loans on its own books. This makes its operation very profitable and relatively immune to economic downturns.
Now that it’s far from its peak, you can buy shares of Upstart for about 40 times earnings forecasts. That’s a sky-high valuation compared to most companies, but not for such rapid growth. This year, management expects revenue to climb 65% year-over-year to around $1.4 billion – and that’s just a drop in the bucket. relative to the company’s total available market.
Start your engines
Upstart’s performance in 2021 was exceptional, although it was still focused on providing personal loans. This year, the company is expanding into the much larger auto loan market, and it’s going very well. This month of March, Subaru and volkswagen hired Upstart to modernize the car buying experience at its dealerships.
This year, Upstart expects to process about $1.5 billion in auto loan transactions. It’s a good start, but it’s only the start. In the United States alone, car buyers borrow an estimated $727 billion a year, and according to Upstart, there’s far less competition for auto loans than for the personal loan category it already dominates.
Upstart has hired teams of developers to create new platforms for small business loans and mortgages. The small business loan category is a bit smaller than the auto loan category, and the mortgage market is huge. US banks issue about $4.6 trillion in home loans annually.
We’ll know a lot more about Upstart’s expansion beyond the limited personal loan market when the company releases its first quarter results after the bell on Monday, May 9, 2022. The Federal Reserve Bank’s recent decision to raise the 0.5% interest rate slow down the overall loan origination rate across the board. Even though this cuts the company’s available market in half, there is still plenty of room to grow as the world’s first and leading AI-based lending platform.
10 Stocks We Like Better Than Upstart Holdings, Inc.
When our award-winning team of analysts have stock advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*
They just revealed what they think are the ten best stocks investors can buy right now…and Upstart Holdings, Inc. wasn’t one of them! That’s right – they think these 10 stocks are even better buys.
View all 10 stocks
* Portfolio Advisor Returns as of April 7, 2022
Cory Renauer has no position in the stocks mentioned. The Motley Fool fills positions and recommends Upstart Holdings, Inc. and Volkswagen AG. The Motley Fool recommends Fair Isaac. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.