Upstart Holdings, Inc.

Analysis of Upstart Holdings (UPST)

Technical Perspective UPST is in a pronounced downtrend, trading near its 52-week low with extreme oversold conditions. Despite its high volatility (Beta 2.39), indicating potential for sharp rebounds, the stock has shown persistent weakness and severe underperformance relative to the market. The current technical setup suggests continued pressure, though a bounce from oversold levels is possible.

Fundamental Assessment UPST maintains strong revenue growth and an impressive 91% gross margin, reflecting solid pricing power. However, profitability is declining amid rising expenses, and operational efficiency is weak with low returns on equity and assets. The company’s high debt levels and low interest coverage raise concerns about financial sustainability despite adequate liquidity.

Valuation & Risk Valuation metrics signal significant overvaluation, with elevated P/E and EV/EBITDA ratios coupled with a negative PEG ratio, indicating disconnected growth expectations. Risks are heightened by extreme price volatility, substantial leverage, and a lack of short interest transparency, which could amplify downside moves during market stress.

Investment Recommendation UPST currently presents a high-risk profile with declining profitability, challenging valuation, and persistent technical weakness. While its strong gross margin and oversold condition may attract speculative interest, the fundamental and valuation concerns outweigh potential short-term rebounds. For most investors, it is prudent to avoid this stock until there is clearer evidence of operational improvement and sustainable earnings growth.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, here is a 12-month outlook for Upstart Holdings (UPST):

12-Month Outlook for UPST:

The 12-month outlook for UPST remains challenging. A key positive catalyst would be a return to sustainable profitability and improved operational efficiency, which could help justify its valuation. However, significant risks dominate the picture, including persistent fundamental weakness from declining earnings, high financial leverage, and an overvalued stock price that appears disconnected from its growth trajectory. Given the absence of a consensus analyst target and the stock's pronounced downtrend, the price action is likely to remain highly volatile and under pressure; a decisive break above the $40-45 level would be needed to signal a potential trend reversal, while a failure to hold recent lows could lead to a test of lower supports.

Wall Street Consensus

Most Wall Street analysts are optimistic about Upstart Holdings, Inc.'s 12-month outlook, with consensus target around $30.65, indicating expected upside potential.

Overall, UPST has investment potential but also faces challenges. Here are key factors to weigh before investing.

UPST has demonstrated extremely weak performance over the past year, characterized by significant price erosion and high volatility. The stock is currently trading near its 52-week low, reflecting substantial negative momentum and considerable underperformance relative to the broader market.

Short-term performance has been exceptionally poor, with the stock plunging over 31% in the past month and nearly 18% over three months. This significant decline sharply contrasts with the market, as evidenced by a -19.66% relative strength, confirming pronounced underperformance.

Currently trading just above its 52-week low of $29.60, UPST is in a deeply oversold condition. Given its high beta of 2.39 and proximity to a key support level, the stock faces significant technical pressure despite being at extreme oversold levels based on its price range.

Revenue & Profitability Upstart shows healthy revenue growth with Q4 2025 revenue reaching $304 million, up from $286 million in Q3. However, profitability metrics have weakened, with the net profit margin declining to 6.1% in Q4 from 11.1% in Q3, primarily due to increased operating expenses. The company maintains an exceptionally high gross profit margin of 91%, indicating strong pricing power on its core services.

Financial Health The company maintains solid liquidity with strong current and quick ratios near 3.0, supported by a cash ratio of 1.64. However, Upstart carries significant leverage with a debt-to-equity ratio of 2.32 and total debt to capitalization of 70%, while the low interest coverage ratio of 0.69 raises concerns about debt servicing capacity. The negative cash conversion cycle of -74 days indicates efficient working capital management.

Operational Efficiency Operational efficiency appears challenged with a low return on equity of 2.3% and minimal return on assets of 0.6%. The asset turnover ratio of 0.10 suggests inefficient utilization of the company's asset base to generate revenue. These metrics indicate room for improvement in converting the company's investments into profitable returns.

Based on the provided metrics, UPST appears significantly overvalued. A TTM P/E ratio of nearly 58 and a similarly high Forward P/E indicate the market is pricing in substantial future growth. This overvaluation is starkly confirmed by a negative PEG ratio of -1.35, which signals that earnings growth expectations are negative or that the current price is not justified by the growth trajectory. The extremely elevated EV/EBITDA of over 213 further underscores that the company's enterprise value is disproportionate to its underlying cash flow generation.

A direct peer comparison using industry averages is not feasible as no industry data was provided. However, UPST's metrics must be considered in the context of high-growth fintech or consumer finance companies. The negative PEG ratio is a severe warning sign, suggesting that even within a high-growth sector, the stock's valuation is detached from a realistic earnings growth profile. The high P/E and EV/EBITDA ratios would likely be at the extreme upper end of any relevant industry comparison.

Volatility risk is exceptionally high, as evidenced by a Beta of 2.39, indicating the stock is more than twice as volatile as the broader market. This elevated sensitivity is underscored by the severe 64.12% maximum drawdown over the past year, highlighting significant downside risk during market downturns.

Other risks include the notable absence of reported short interest data, which may obscure underlying market sentiment or liquidity concerns. When combined with the stock's high volatility, this lack of transparency could exacerbate price swings and potentially create liquidity challenges, especially during periods of market stress.