Upstart (NASDAQ: UPST), a cloud-based artificial intelligence lending platform in the U.S., recently announced its Q4 earnings, which significantly exceeded market expectations. The company reported revenue of $219 million and earnings of $0.26 per share, surpassing the consensus estimates of $181 million in revenue and a loss of $0.04 per share. Additionally, its forward guidance also exceeded expectations. Following the strong quarterly results, UPST stock surged by more than 20% in after-hours trading. Separately, CROX reports earnings tomorrow. Will the stock pop on the news? See How Might Crocs Stock React To Upcoming Earnings?
Since the start of 2024, UPST stock has gained 65%, outperforming the S&P 500 index, which has risen 27% over the same period. The company’s stock price has been driven higher by newly established partnerships to fund consumer loans. If you are looking for an alternative with steadier growth than an individual stock, you might consider the High-Quality Portfolio, which has delivered over 91% returns since inception and has outperformed the S&P 500.
Upstart’s revenue for Q4 reached $219 million, reflecting a 56% year-over-year increase, driven by strong loan origination growth. The company facilitated the sale of 246,000 loans totaling $2.1 billion, marking a 68% increase from the previous year’s quarter. The loan conversion rate also improved significantly, rising to 19.3% from 11.6% in Q4 2023.
Upstart’s adjusted EBITDA margin surged to 17.7% in Q4 2024, a significant improvement from 0.4% in the same quarter of the previous year. The combination of higher revenue and improved margins helped the company achieve earnings of $0.26 per share, compared to a loss of $0.11 per share in Q4 2023. Looking ahead, Upstart projects Q1 revenue of approximately $200 million and earnings of $16 million, with full-year 2025 revenue expected to reach $1 billion—substantially above the consensus estimate of $0.8 billion.
UPST stock has seen significant gains recently, though it has also experienced notable volatility. Over the past few years, its returns have been highly inconsistent compared to the S&P 500. The stock delivered a return of 271% in 2021, dropped by 91% in 2022, rebounded with a 209% gain in 2023, and is up 51% so far in 2024.
In comparison, the Trefis High-Quality Portfolio, which consists of 30 stocks, has demonstrated significantly lower volatility. It has also outperformed the S&P 500 over the last four years. Why? The portfolio consists of stocks that offer higher returns with lower risk, making for a less volatile investment, as evident in the HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment, including potential interest rate cuts and ongoing trade tensions, it remains to be seen whether UPST will outperform the S&P 500 over the next year or face challenges similar to those in 2022. At its current price of $67, UPST trades at 9.5 times trailing revenue, slightly above its four-year average of 8.4 times. Considering Upstart’s recent strong performance, a higher valuation multiple may be justified. However, if the stock rises to $80, as indicated in after-hours trading, this would push its price-to-sales ratio to around 11.3 times, reflecting positive expectations. Investors may find better value by waiting for a price dip before entering at $80. As an aside, see What’s Happening With McDonald’s Stock?
While UPST stock continues to rise, it’s worth comparing Upstart’s peers on key performance metrics. You can find more comparative data for various industries at Peer Comparisons.
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