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Shares of Upstart (NASDAQ:UPST) crashed more than 25% in pre-market trading after the artificial intelligence (AI) lending business reported weaker-than-expected earnings and outlook.
Upstart’s results show that the company continues to struggle amid significant pressure that stems from a deteriorating macro environment. Upstart reported an adjusted loss per share of $0.24 on revenue of $157.2 million, much worse than the consensus that was expecting a loss per share of $0.07 on revenue of $171.16M. Year-over-year (YoY), revenue declines by 31%.
For this quarter, Upstart sees revenues at $135M (up or down $10M), signaling a further deceleration compared to the prior quarter. Analysts were calling for a quarter-to-quarter (QoQ) growth and expected Upstart to guide for $188.1M in Q4 revenues. The AI lending company also expects to record an adjusted net loss of $40M and an adjusted EBITDA loss of $35M.
Morgan Stanley analysts reiterated an Underweight rating and cut the price target to $11.50 per share price target as they believe UPST stock offers “one of the least favorable risk/reward propositions within our coverage.”
“Our lower price target reflects not only elevated uncertainty surrounding UPST’s operating performance given increasing losses, but also a fundamentally smaller market opportunity within subprime personal lending over our forecast horizon,” the analysts wrote in a note.
Goldman Sachs analysts also reiterated a Sell rating and cut the price target to $11 per share (from $14).
“UPST remains funding constrained, which has resulted in worse-than-expected originations. UPST continues to increase loans on balance sheet, with loans of $700 mn (v. 2Q22 of $624 mn) driven primarily by increases in core personal loans. We reiterate our Sell rating on UPST and continue to see downside risk,” they told clients.
Upstart stock price was down over 85% year-to-end (YTD) heading into the results.
