Analysts have criticized Upstart's changing underwriting model and reliance on third-party funding. They also expressed concern about the company's technology, stating that it has yet to be tested in a true recession. Vincent Caintic, an analyst at Stephens, suggested that Upstart could improve its trajectory by focusing on its core business and shifting its decision-making approach from a tech company to a lending company.
Key takeaways:
- Upstart's third quarter earnings missed expectations, with fee revenue growth limited due to high interest rates and consumer risk, leading to lower income than anticipated.
- CEO Dave Girouard announced that the company is doubling down on credit union partnerships, introducing home equity lines of credit, and continuing to invest in its AI models to compensate for the shortfall.
- Upstart's stock fell more than 25% following the earnings call, and the company's projected fee income for the fourth quarter also falls short of Wall Street's estimates.
- Analysts suggest that Upstart could improve its trajectory by focusing on its core business instead of adding new strategies, and shifting from making decisions like a technology company to making decisions like a lending company.