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Why Upstart Stock Was Climbing Today

What happened

Upstart Holdings (NASDAQ: UPST) stock was on the move today, rising 9.9% as of 1:09 p.m. ET.

There was no company-specific news out on the fintech stock, but traders are positioning themselves ahead of its earnings report after hours. Based on current options pricing, traders expect Upstart to swing 24% after hours, a typical move for the volatile lending technology disruptor.

So what

Upstart, which connects borrowers to lenders using artificial intelligence technology to assess creditworthiness and price loans, has plunged in the market sell-off, down more than 90% from its peak.

Investors have turned skeptical of the one-time market darling amid rising interest rates and fears of a recession, which has led banks to beef up their loan loss reserves, as Upstart has yet to prove itself and its model through a full credit cycle.

Given the dynamic market environment and the larger questions about the economy, it's not surprising that investors expect a big swing in the stock as the company's performance during the second quarter will offer some key insights into its long-term prospects.

The stock may also be getting a boost in the aftermath of Friday's strong jobs report, which shows the economy remains strong in spite of the recession talk. Positive economic data, including a falling inflation rate, would certainly be bullish for Upstart and help alleviate fears of a wave of defaults. Shifting market sentiment also seems to be driving a number of growth stocks higher, including Upstart.

Now what

For the second quarter, analysts are calling for revenue of $241.6 million, up 24% from the quarter a year ago, and see earnings per share of $0.10, down from $0.62.

With those relatively modest estimates and a price-to-earnings ratio of just 19, Upstart stock should soar if it can beat the Wall Street view. Its P/E ratio is in line with the S&P 500, suggesting that the market believes its high-growth days are about to cool off.

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Jeremy Bowman has positions in Upstart Holdings, Inc. The Motley Fool has positions in and recommends Upstart Holdings, Inc. The Motley Fool has a disclosure policy.


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