Here’s why Upstart still has high growth potential


Reached (NASDAQ: UPST) has been one of the most disruptive stocks to come to market this year, climbing over 1000% at one point. However, there is reason to believe that the AI-based consumer loan specialist still has a potential of 10 baggers.

In this segment of “The Five” recorded on 23 novemberFool contributors Connor Allen and Jason Hall discuss the disruptive potential of Upstart and its risks.

Jason Hall: Connor, what do you have for us?

Connor Allen: Taylor, I must say I love Coinbase also. I think they have a great first-mover advantage there, especially with all the settlements to come. But for me my stock that I would choose at 10X should be Upstart. Upstart is a recommendation on many Fool services. They basically redesign the way credit scores and FICO loans are done. As their price drops after their earnings which have gone rather well, their valuation continues to look better and better to me. For example, if you look at some of the forward price projections to earnings, it’s really not that bad, like you’re looking at 40-50x profit if you zoom out for a few years or even a few months. I think Upstart right now with the valuation it’s at is pretty good, especially with the growth they’re expecting in the next few years and the new customers they’re getting and all the big banks. As long as nothing major happens, I think there’s a ton of organic growth to be had if Upstart keeps moving forward and doing what it’s doing. Obviously, if a big bank were to decide to start doing their own algorithm similar to what Upstart does for granting loans, then something could go wrong, especially if their system starts having higher default rates than FICO, that is. is also another risk. But I think the current activity and some organic growth going forward could definitely push that up to a 10X stock.

Jason Hall: I think the potential is there and to think of a business in terms of pure social good that it does too is amazing. If there is one industry that is ready to be ripe for this disruption, it is the loan. Some of these lenders think like auto loans and especially like subprime lenders. I like what they do. I want to highlight the default risk factor. Until we go through a full credit cycle, we won’t know how good their credit quality is. Were not. You can wargame anything you want, you can simulate it anything you want. But until you go through a full business cycle with an economic downturn and people out of work, all of that, we just don’t know what their credit quality is. This is a very real risk and it may take 3-5 years before we know more. It’s the one thing I’ve been very careful with about Upstart, but I love what they do and I think, Connor, you’re right. It definitely has a potential of 10 or more baggers, even from where it is currently.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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