Shares of Upstart Holdings Inc (UPST, Financial), recently priced at $59.22, experienced a price drop of 1.71%. This decline comes amid ongoing sensitivity to changes in the federal funds rate, which has been a significant factor influencing the stock's performance.
Upstart Holdings Inc, known for its artificial intelligence lending platform, is highly sensitive to interest rate fluctuations. The company has a business model centered on increasing borrower approvals while aiming to reduce lender risk. Despite these efforts, its revenue has seen declines in recent years as lenders have shifted towards more attractive high-rate opportunities.
Notably, Upstart's revenue increased by 12% over the first three quarters of 2024 compared to the same period in 2023. This growth was concurrent with a 16% drop in the federal funds rate from its 2024 peak, enhancing Upstart's relationships with lending partners and causing a 51% surge in its stock price in 2024.
However, the stock recently dropped, with market sentiment suggesting that the benefits of previous rate cuts had already been priced in. Further complicating the outlook, the Federal Reserve's recent comments have left investors uncertain about additional rate cuts in 2025.
Adding to investor apprehension, Upstart CEO David Girouard's sale of nearly 42,000 shares in December, although pre-planned, has contributed to the selloff. Insider selling, especially during periods of market uncertainty, can often unsettle investors.
From a valuation perspective, Upstart is currently deemed "Significantly Overvalued" according to its GF Value, with a GF Value of $27.94. Investors interested in a deeper valuation analysis can refer to the GF Value page for more details. The company trades with a price-to-book ratio of 9.06, indicating a premium valuation relative to its book value.
The stock has shown volatility, with a year-to-date change of -3.93% but has experienced a remarkable 66.2% gain over the past 52 weeks. Upstart's market cap stands at $5.40 billion, with a volume of over 2.69 million shares traded daily.
Despite its promising technology and growth story, potential investors should remain cautious due to the company's sensitivity to interest rate changes, insider selling trends, and its current overvaluation in light of the GF Value.
