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Due to misreading how upset Wall Street would become about rising interest rates, in my last column on Upstart (NASDAQ:UPST) stock, my recommendation that investors consider buying the stock proved to be premature.
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Still, after another 30% retreat by the name and amid multiple signs that the Street is warming up to the shares, I’m more bullish on the name than I was when my previous column was published on Jan. 3.
Also importantly, I remain very upbeat on Upstart’s fundamentals and long-term outlook. UPST looks like a solid long-term play.
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Here’s why.
The Street Is Warming up to UPST Stock
InvestorPlace contributor Ian Bezek, a former Street analyst, was once very bearish on Upstart. But in the wake of the stock’s recent plunge, even Bezek is becoming more upbeat on the name.
In a Jan. 12 column, he wrote, “What makes UPST stock potentially viable, at least as a name to trade, is that the company earns money.” He added that “Upstart is not as bad of a company as many of the other so-called disruptive stocks.”
On the other hand, Bezek does not expect the shares to be over $100 in the “long term.” He wrote that “Upstart’s IPO price was just $20 per share not too long ago, after all.” But the fact that he’s much more optimistic on the stock’s outlook than he once was suggests that the Street is likely to view the shares more favorably in the days and weeks ahead.
In other indications that the market is becoming more upbeat on Upstart, a research firm recently issued a largely favorable note on the name.
On Jan. 13, Piper Sandler (NYSE:PIPR) kept an “overweight” rating on Upstart. Analyst Arvind Ramnani indicated that he views Upstart as one of the better names in the “vertical software and fintech sector.” Ramnani remained upbeat on the “higher quality names” in the sector and cut his price target on the shares “to $223 from $300,” The Fly noted. But that target is still more than double Upstart’s current price.
Upstart Is Very Different From Many Other Growth Stocks
As Bezek noted one characteristic that distinguishes Upstart from some other growth names is its profitability. Indeed, in the 12 months that ended in September, the company’s operating income came in at $96 million.
In my view, the firm’s profitability, along with Upstart’s exceptionally rapid revenue growth (its top line soared nearly 1,000% year-over-year in the third quarter) indicates that the company’s offerings are seen as quite valuable. And, the company must have some important comparative advantages in its target market. Combined with the company’s extremely strong revenue growth, of course, all indicates that its solutions are quickly proliferating.