Upstart Holdings, Inc. (NASDAQ:UPST) operates at the crossroads of fintech and artificial intelligence, poised for robust growth and establishing itself as a significant contender in this space. Investors remain optimistic, with the company's stock gaining approximately 220% over the past year, albeit with some losses since mid-February. With a strong performance across segments and reasonable valuation, there's potential for future growth. Consequently, I rate Upstart as a buy.

Financial Overview

Upstart reported its 2025 Q1 earnings in early May, bringing in total revenues of $213 million. While this marked a slight decrease from Q4, the 67% year-over-year increase is promising, marking the third consecutive quarter of revenue growth. The figures exceeded expectations by $12.11 million, showcasing Upstart's ability to outperform even high expectations.

Revenue was driven by originations totaling $2.1 billion, an impressive 89% increase from the previous year, also marking the third consecutive quarter of improvement. A potential Federal Reserve rate cut could further enhance business activity by year-end. Upstart made $43 million in adjusted EBITDA for Q1, a substantial turnaround from the $20 million adjusted EBITDA loss a year ago. Additionally, adjusted EPS improved to $0.30, compared to a $0.31 loss per share from the prior year. This indicates Upstart is on a healthy growth trajectory.

Strength Across Segments

Personal loan originations reached $2.032 billion, an 83% year-over-year increase and the lowest growth rate among the segments. Despite being the largest segment, such a growth rate remains impressive. The rise in the number of loans represents a growth rate of about 100%, indicating a trend towards smaller individual loans. Nevertheless, this shows a strong performance of the core business.

Auto originations were particularly remarkable, totaling $61 million — a 42% increase quarter-over-quarter and a 369% year-over-year increase. The growth of originations accelerated, reflecting increased loan sizes and robust demand in this sector.

In the home segment, originations soared to $41 million, marking a 52% QoQ and a 486% YoY increase, despite decelerating from Q4's sharp growth. An impressive 500% increase in loan numbers demonstrates strong demand and highlights Upstart's broad-based business strength.

Innovation Is Paying Off

Automation significantly contributes to Upstart's success, resulting in increased loan volumes. With 75% of loans automatically approved, more than 92% of their 241,000 loans were fully automated, resulting in substantial cost savings and increased efficiency, with significant potential for further business growth.

Outlook Is Bright

Upstart forecasts revenues of around $1.01 billion for 2025, translating to a 59% rise from 2024's figures. However, Q2 projections suggest revenues of $225 million, with an expected growth rate of 76%, indicating a decline in growth for the second half of 2025. The adjusted EBITDA margin of 19% represents a major leap from previous figures. Upstart shows significant promise for long-term growth despite short-term variabilities.

Room For Multiple Expansion

The P/S ratio has seen fluctuations, currently at 9.424, suggesting potential for further expansion. Rapid revenue growth, projected by year-end, coupled with guidance, supports robust momentum for Upstart, justifying its premium valuation amidst a median Financials sector P/S ratio of 3.15.

Bulls Dominate Near-Term

Bulls are currently in control of Upstart's stock, suggested by the technical indicators such as a possible golden cross in the future. The stock surpassed the 200-day SMA in June, and it is overbought according to current readings, which may indicate near-term cooling. The MACD and RSI suggest strong bullish momentum.

Concluding Remarks

Upstart stands strong in the fintech arena with impressive financial growth and a robust business trajectory across all segments. Despite a premium valuation, its technological advancements support future potential. Upstart's bright outlook and strong technical momentum make it a worthy buy at current levels.