Upstart: oversold stocks with promising prospects

Upstart Holdings (UPST) uses artificial intelligence to connect banks and consumers with suitable lending options.

I am bullish on the stock. (See the top analyst stocks on TipRanks)

An opportunity

The Relative Strength Index is a valuable metric to use when analyzing whether a stock is oversold or not. A stock’s RSI score is based on the magnitude of its recent price changes; a score above 70 is considered overbought, while a score below 30 is generally considered oversold.

Upstart currently has a score of 36.2, which is well below its all-time high of 83.67 reached in 2021.

Benefits and outlook

Upstart delivered strong financial results for the third quarter last month. The company’s revenue grew 250% year-over-year, and operating revenue also increased 134%. Additionally, net profit increased 201% year-on-year as cost synergies began to pay off.

Looking ahead, the company anticipates a strong year-end, having raised its fourth-quarter revenue forecast from $ 255 million to $ 265 million. Upstart management also expects net income to be solidly between $ 16 million and $ 20 million.

Systemic support

Two tailwinds will play an important role for Upstart in 2022.

The first is the improvement of the debt market. With rising interest rates, loan originators will have the opportunity to earn excess spreads on loans. Upstart will likely benefit from the higher margins and the current growth in the total number of transactions.

The second is the continued growth of total factor productivity. Factor productivity is the third economic component (besides capital and labor) that contributes to GDP growth and is often considered the most important of the three in developed economies.

Total factor productivity has jumped 4% this year, and although a slight decline occurred in the third quarter, factor productivity is expected to rise in the coming years as the tech sector continues to evolve.

The Taking of Wall Street

Let’s move on to Wall Street. Analysts believe the stock is a moderate buy, based on five attributed buy, hold and sell in the past three months. The average Upstart street price target is $ 299.29, showing potential value upward of 59.8%.

Concluding thoughts

The upstart action has seen a period of intense selling and the action is trading in oversold territory. The company is expected to benefit from the growing technological economy and a better debt market in 2022.

Disclosure: At the time of publication, Steve Gray Booyens does not have a position in any of the titles mentioned in this article.

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