Why Is Upstart Stock Skyrocketing?

Upstart (NASDAQ: UPST), a cloud-based artificial intelligence (AI) lending platform in the U.S., recently released its Q4 results that were well above the street estimates. It reported revenue of $219 million and earnings of $0.26 per share, compared to the consensus estimates of $181 million in sales and a loss of $0.04 per share. Furthermore, its outlook was also above the expectations. UPST stock surged over 20% in after market hours following a solid quarterly performance.

UPST stock, with 65% returns since the beginning of 2024, has outperformed the S&P 500 index, up 27%. The company secured new partnerships last year to fund the consumer loans, driving its stock price growth. If you are looking for an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Upstart’s revenue of $219 million in Q4 reflected a solid 56% y-o-y growth, driven by strong growth in loans disbursed. The company sold 246k loans for a value of $2.1 billion, up 68% from the prior-year quarter. The conversion rate of 19.3% was also meaningfully higher than 11.6% in Q4’23.

Upstart saw its adjusted EBITDA margin surge to 17.7% in Q4’24, versus 0.4% for the same period in the prior year. Higher sales and margin expansion boosted its bottom line to $0.26, compared to a loss of $0.11 per share in Q4’23. Looking forward, Upstart expects its Q1 sales to be around $200 million and earnings of $16 million, and its full-year 2025 sales to be $1 billion. This is well above the consensus estimate of $0.8 billion in sales for 2025.

Turning to UPST stock, it has experienced a significant upward move recently. However, this has been accompanied by considerable volatility. The changes in UPST stock over the recent years has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 271% in 2021, -91% in 2022, 209% in 2023, and 51% in 2024.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could UPST face a similar situation as it did in 2022 and underperform the S&P over the next 12 months — or will it see a strong jump? At its current levels of $67, UPST stock is trading at 9.5x trailing revenues, slightly above the 8.4x average P/S ratio over the last four years. Based on Upstart’s recent strong performance, we believe an upward revision to its historical valuation multiple is warranted. However, if the stock trades at $80 levels, as pointed to in after market hours, it would imply a P/S ratio of around 11.3x, factoring in the positives. We think that investors may find better value by waiting for a price pullback before establishing a position at levels of $80.

While UPST stock is trending higher, it is helpful to see how Upstart’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/12/2025
[2] Cumulative total returns since the end of 2016

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