Upstart (NASDAQ:UPST) is down over 23% in Tuesday’s after-hours trading. Shares of this financial technology company nosedived following its mixed Q3 performance and lower-than-expected Q4 revenue outlook. Overall, UPST stock has lost substantial value over the past three months (down over 43%). Despite the decrease, now is not the right time to buy UPST stock, as per Wall Street analysts.
Let’s see why.
Upstart to Remain Under Pressure
Goldman Sachs analyst Mike Ng reiterated the Sell recommendation on Upstart stock following the Q3 financial results. The analyst believes that this AI (Artificial Intelligence)-driven lending platform could continue to encounter challenges due to the deceleration in loan origination and revenue growth. The analyst added that this slowdown is indicative of heightened competition and rising funding costs at the company’s partners, which, in turn, adds uncertainty over its growth and market share gains. Given the slowdown, Mike Ng finds it difficult to justify Upstart’s premium valuation compared to its peers.
Meanwhile, Mizuho Securities analyst Dan Dolev maintained a Sell recommendation on UPST stock following the Q3 financials. The analysts said Upstart’s Q3 revenue of about $135 million missed the analysts’ consensus estimate of $141 million. Moreover, its Q4 revenue guidance of $135 million came in lighter than the consensus forecast of $153 million. Dolev said that this explains why Upstart stock is trending lower in after-hours.
While Goldman and Mizuho Securities analysts are bearish, Lance Jessurun from BTIG maintained a Buy rating on Upstart stock. However, Jessurun lowered the price target to $32, reflecting a weak revenue outlook.
Is Upstart a Buy, Sell, or Hold?
Upstart stock has received six Hold and seven Sell recommendations for a Moderate Sell consensus rating. At the same time, the average UPST stock price target of $22 implies 25.2% downside potential from current levels.
Upstart is pursuing committed funding partnerships to strengthen the reliability of loan funding on its platform, which is encouraging. Moreover, it is diversifying its sources of funding. However, the elevated interest rate environment and rising funding costs continue to pose challenges and could hurt its financials.