LC - Upstart: AI Edge Is Fueling Outperformance Amidst Macro Uncertainty

2025-05-02 17:14:40 ET

Summary

• Upstart’s improving AI models are leading to higher conversion rates and lower delinquencies, increasing its partners’ trust in its loans.
• The growing trust in Upstart’s loans is being reflected in its committed capital deals, a departure from the at-will funding deals secured in prior years.
• Improving AI capabilities and increasing investments in automation are flowing through to Upstart’s bottom line, significantly improving its profitability profile.
• Possible rate cuts in the second half of the year to boost economic growth could increase demand for refinancing, positioning Upstart to benefit from its expanding network of credit unions.
• I’m rating Upstart as a buy with a price target of $102, representing a 115% upside from its current valuation.

Despite macro uncertainty, Upstart Holdings, Inc. ( UPST ) appears to be an undervalued fintech with promising potential this year. The company’s AI models and increasing investments in automation are leading to better loan performance and less delinquencies, while improving its profitability profile. The improving capabilities of Upstart’s AI models are a major driver for the funding commitments it has, as more than 50% of loans originated through its platform are from committed capital....

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