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Upstart Holdings, Inc.
Financial Services | Credit Services
⚡ Executive Summary
📊 The Bottom Line
Upstart is an AI-powered lending platform disrupting traditional credit assessment. It focuses on expanding into new loan products and achieving GAAP profitability, aiming for high growth while continuously improving its credit assessment models.
⚖️ Risk vs Reward
At current levels (US$39.25), analyst targets range from US$20.00 to US$80.00, averaging US$56.64, suggesting potential upside. However, its high P/E ratio compared to the US Consumer Finance industry indicates valuation risk.
🚀 Why UPST Could Soar
- • Upstart's proprietary AI model uses over 1,000 data points for more accurate credit risk assessment, leading to higher approval rates and lower default rates compared to traditional FICO scores.
- • Expansion into auto loans, home equity lines of credit (HELOCs), and small dollar loans significantly broadens its total addressable market and creates substantial new revenue streams.
- • Increasing confidence from capital partners, including large forward flow agreements and warehouse facilities, ensures stable funding for loan originations without excessive balance sheet risk.
⚠️ What Could Go Wrong
- • As a lending platform, Upstart is highly sensitive to macroeconomic conditions like interest rate fluctuations and credit cycles, which can impact loan volumes, default rates, and funding availability.
- • AI-driven lending faces increasing regulatory scrutiny regarding data privacy, bias, and transparency. Competition from established financial institutions investing in similar AI technologies also poses a threat.
- • Volatility in its loan book size and performance, coupled with negative free cash flow, creates risk. Difficulties in offloading held loans could tie up capital and lead to shareholder dilution.
🏢 Company Overview
💰 How UPST Makes Money
- • Upstart operates a cloud-based artificial intelligence (AI) lending platform in the United States, connecting consumers with banks and credit unions.
- • It assesses credit risk using over 1,000 non-traditional variables for personal loans, auto retail and refinance loans, home equity lines of credit (HELOCs), and small dollar loans.
- • Revenue is primarily generated from fees charged to lending partners for using its AI models and platform for loan originations and servicing.
- • A smaller portion of revenue comes from net interest income on loans held on its balance sheet.
- • The platform automates over 90% of loans, enhancing efficiency for its over 100 bank and credit union partners.
Revenue Breakdown
Fees
92%
Revenue generated from lending partners for using Upstart's AI platform and services.
Net Interest Income
8%
Income earned from interest on loans held or retained on the balance sheet.
🎯 WHY THIS MATTERS
Upstart's AI-driven model allows it to identify creditworthy borrowers often overlooked by traditional methods, potentially expanding access to credit and reducing default rates for its partners. This scalable platform and diversified product offerings are crucial for its long-term growth potential.
⭐ Competitive Advantage: What Makes UPST Special
1. Proprietary AI Underwriting Model
Upstart's advanced AI model is its core competitive advantage, analyzing over 1,000 data points beyond traditional credit scores for superior risk assessment. This enables partner banks to approve more loans at lower rates with potentially less risk, disrupting conventional lending. The model continuously refines itself, creating a self-reinforcing competitive loop.
2. Extensive Lender Network & Referral System
Upstart has cultivated a robust network of over 100 banks and credit unions leveraging its platform. This network, coupled with its referral system, efficiently matches borrowers with lenders, driving transaction volume. The stickiness of these partnerships and integration into banking systems create a significant barrier to entry for new competitors.
3. Diversified Product Portfolio
Beyond personal loans, Upstart has successfully expanded into auto retail/refinance loans, home equity lines of credit (HELOCs), and small dollar loans. This diversification applies its core AI technology across a broader total addressable market, mitigating reliance on a single product segment and creating multiple avenues for sustained revenue growth.
🎯 WHY THIS MATTERS
These advantages collectively create a powerful network effect for Upstart: enhanced AI leads to more successful loan outcomes, which attracts additional lenders and borrowers. This virtuous cycle provides more data to further refine the AI, solidifying its position in the evolving lending market.
👔 Who's Running The Show
David J. Girouard
Co-Founder, President, CEO & Chairperson of the Board
David J. Girouard, 59, is the Co-Founder, President, CEO, and Chairperson of Upstart. He leads the company's mission to transform credit using AI. Under his leadership, Upstart has expanded its AI-driven lending platform across various loan products, aiming for sustained growth and GAAP profitability by leveraging non-traditional data for credit assessment.
⚔️ What's The Competition
The AI lending market is characterized by rapid technological innovation and intense competition. Upstart navigates a landscape including traditional financial institutions integrating AI, and other specialized fintech lenders. Competition primarily revolves around the accuracy and efficiency of credit models, the seamlessness of the user experience, and access to consistent, low-cost funding.
📊 Market Context
- Total Addressable Market - The global AI platform lending market was valued at US$74.90 billion in 2024 and is projected to reach US$259.37 billion by 2030, growing at a CAGR of 23.00%.
- Key Trend - Increased adoption of AI and machine learning for enhanced credit risk assessment, fraud detection, and personalized loan offerings across financial services.
Competitor
Description
vs UPST
Affirm Holdings, Inc. (AFRM)
A market leader in buy-now, pay-later (BNPL) services, offering both zero-interest and interest-bearing installment loans for retail purchases.
Affirm primarily focuses on point-of-sale financing for retail, whereas Upstart provides a broader AI-driven platform for various loan types through its bank partners.
SoFi Technologies, Inc. (SOFI)
A diversified fintech company offering student loan refinancing, personal loans, mortgages, banking, and investment services directly to consumers.
SoFi provides a comprehensive suite of financial services directly to consumers, while Upstart primarily functions as an AI lending platform enabling other financial institutions.
Traditional Banks (e.g., JPMorgan Chase)
Large, established financial institutions with extensive customer bases, significant capital, and a full spectrum of traditional lending products.
These incumbents compete with their own lending products and are increasingly developing internal AI capabilities, leveraging existing customer trust and vast resources.
📊 Valuation & Analysis
📈 Wall Street Summary
Analyst Rating Distribution - 2 Sell, 6 Hold, 5 Buy, 3 Strong Buy
2
6
5
3
12-Month Price Target Range
Low Target
US$20
-49%
Average Target
US$57
+44%
High Target
US$80
+104%
Closing: US$39.25 (30 Jan 2026)
🚀 The Bull Case - Upside to US$80
1. AI Model Superiority Driving Efficiency
High Probability
Upstart's continuously improving AI models can better identify creditworthy borrowers, reducing default rates and enhancing loan conversion rates (e.g., 23.9% in Q2 2025 vs. 15.2% in Q2 2024). This technological edge allows partners to offer competitive rates and expand lending responsibly, leading to increased transaction volume and higher fee revenue.
2. Successful Diversification into New Loan Categories
Medium Probability
Significant growth in auto and HELOC originations (e.g., up 60% sequentially in Q4 2024) expands Upstart's total addressable market and revenue streams. As these newer products gain traction, they are expected to become substantial drivers for overall revenue growth, reducing reliance on personal loans.
3. Strengthening Funding Markets & Partner Confidence
High Probability
Increased confidence from capital markets, evidenced by significant funding commitments and successful securitization transactions (e.g., US$1.5 billion forward flow agreement in Nov 2025). This ensures a stable and sufficient supply of capital for loan originations, allowing Upstart to scale its platform without bearing excessive balance sheet risk, boosting profitability.
🐻 The Bear Case - Downside to US$20
1. Sensitivity to Macroeconomic Headwinds
High Probability
Economic downturns, higher interest rates, or increasing unemployment could lead to reduced loan demand, tighter lending standards, and higher default rates. This directly impacts Upstart's transaction volumes, fee revenue, and potentially the performance of loans held on its balance sheet, resulting in volatile earnings.
2. Regulatory & Competitive Pressures in AI Lending
Medium Probability
Evolving regulations around AI in finance could impose compliance burdens or restrict data usage, potentially impacting model effectiveness or increasing operational costs. Furthermore, large banks developing proprietary AI solutions could intensify competition and reduce the need for Upstart's platform.
3. Persistent Loan Book Risk and Funding Volatility
Medium Probability
Despite efforts to offload loans, Upstart's balance sheet has seen an expanded loan book (e.g., up 52.5% from beginning of 2025 to Q3 2025). If market conditions make it difficult to sell these loans or if they underperform, it could tie up capital, increase credit risk, and lead to negative free cash flow, potentially necessitating equity financing and dilution.
🔮 Final thought: Is this a long term relationship?
Owning Upstart for a decade hinges on the enduring superiority of its AI underwriting model over traditional methods and its ability to continually expand its market presence. The strength of its lender network and successful diversification into new loan categories are critical for long-term durability. Key risks include intense competition from incumbent financial institutions and the unpredictable nature of credit cycles. Management's capacity to navigate regulatory changes and maintain strong funding partnerships will be paramount for sustained profitability.
📋 Appendix
Financial Performance
Metric
31 Dec 2024
31 Dec 2023
31 Dec 2022
Income Statement
Revenue
US$0.63B
US$0.51B
US$0.84B
Gross Profit
US$0.00B
US$0.00B
US$0.00B
Operating Income
US$0.00B
US$0.00B
US$0.00B
Net Income
US$-0.13B
US$-0.24B
US$-0.11B
EPS (Diluted)
-1.44
-2.87
-1.31
Balance Sheet
Cash & Equivalents
US$0.79B
US$0.38B
US$0.43B
Total Assets
US$2.37B
US$2.02B
US$1.94B
Total Debt
US$1.45B
US$1.10B
US$1.09B
Shareholders' Equity
US$0.63B
US$0.64B
US$0.67B
Key Ratios
Gross Margin
0.0%
0.0%
0.0%
Operating Margin
0.0%
0.0%
0.0%
Return on Equity
-20.31
-37.80
-16.16
Analyst Estimates
Metric
Annual (31 Dec 2025)
Annual (31 Dec 2026)
EPS Estimate
US$1.67
US$2.39
EPS Growth
+935.9%
+43.2%
Revenue Estimate
US$1.0B
US$1.3B
Revenue Growth
+62.8%
+22.7%
Number of Analysts
14
15
Valuation Ratios
| Metric | Value | Description |
|---|---|---|
| P/E Ratio (TTM) | 157.00 | Indicates how many times investors are willing to pay for each dollar of earnings over the past twelve months. |
| Forward P/E | 16.39 | Estimates how many times investors are willing to pay for each dollar of anticipated future earnings. |
| Price/Sales (TTM) | 3.83 | Compares a company's market capitalization to its revenue over the past twelve months, often used for companies with inconsistent earnings. |
| Price/Book (MRQ) | 5.13 | Measures how much investors are willing to pay for each dollar of a company's book value (assets minus liabilities), indicating valuation relative to net assets. |
| EV/EBITDA | 72.20 | Compares the enterprise value of a company to its earnings before interest, taxes, depreciation, and amortization, often used for valuing capital-intensive businesses. |
| Return on Equity (TTM) | 4.81 | Measures the net income generated for each dollar of shareholders' equity over the past twelve months, indicating profitability relative to equity. |
| Operating Margin | 11.35 | Represents the percentage of revenue remaining after paying for operating expenses, indicating a company's operational efficiency and profitability. |