Upstart Drops 7% After Bank of America Lowers Price Target Ahead of Earnings
Upstart shares fell 7% following Bank of America's reduction of its price target from $37 to $30, just before the company releases its third-quarter earnings. Despite strong performance in peer fintech firms like SoFi and Affirm, Upstart’s decline appears driven by investor concerns over its ability to meet revenue and EBITDA guidance for the year. The stock remains undervalued relative to historical multiples, with a 7.6x forward P/E, suggesting that reaffirming guidance could stabilize sentiment.
Upstart (UPST) shares dropped 7% on the day before its third-quarter earnings report after Bank of America lowered its price target from $37 to $30, citing concerns over the company’s ability to meet full-year revenue and EBITDA guidance. The stock now trades at a forward P/E of just 7.6x, significantly below its historical average of around 14x, suggesting deep market skepticism despite apparent undervaluation. To meet its annual targets, Upstart must generate approximately $727 million in revenue and $177 million in adjusted EBITDA in the second half of the year—equivalent to two more quarters mirroring its strong Q2 performance, which delivered $364.7 million in revenue at a 24% margin. This contrasts with broader fintech trends: SoFi (SOFI) and Affirm (AFRM) posted gains, while Pagaya (PGY) reported record network volume of $3.6 billion in Q3, indicating that investor concerns are specific to Upstart’s execution risks rather than sector-wide weakness. The company is still awaiting regulatory approval from the FDIC and Federal Reserve for its planned bank launch in early 2027, a key strategic move to reduce reliance on external funding—unlike SoFi, which currently funds 90% of its liabilities through deposits.
The broader market context reveals that Wall Street’s average price target for Upstart has halved over the past year, now sitting at $38, still above BofA’s revised $30. Analysts remain divided, with TIKR tracking 16 analysts and a mix of Buy, Hold, and Sell ratin
The sell-off in Upstart’s stock, while isolated from broader fintech gains, highlights the fragility of growth stocks reliant on future earnings certainty. Investors may be recalibrating expectations for high-growth fintechs amid rising interest rates and tighter credit conditions, where funding costs are increasing—particularly for firms like Affirm and Upstart that depend on external capital. If Upstart reaffirms its guidance, it could signal resilience in digital lending despite macro headwinds, potentially stabilizing sentiment across the sector. Conversely, a lowered outlook may trigger broader caution toward fintechs with unproven banking models or high leverage. A comparable case is the 2022 selloff in crypto-related stocks after regulatory scrutiny and liquidity concerns—where overvaluation met reality, leading to prolonged underperformance. What’s next could include increased scrutiny of fintechs’ path to profitability, especially those building banks. The market may also watc