Sign InUPST Stock Analysis: Volatility, Potential Short Squeeze, and Mixed Sentiment
Summary
Upstart Holdings, Inc. (UPST) has seen a significant increase in its stock price and trading volume, with technical indicators suggesting a potential short-term run-up, but caution is advised due to negative fundamentals and an overbought condition. (Analysis conducted on July 19, 2023)
Introduction
Upstart Holdings, Inc. (Ticker: UPST), a company listed on the NASDAQ exchange, has been under intense scrutiny by the investment community and financial media. This analysis would delve into the company's financials, short-term price movements, and recent news items to derive an informed opinion on the company's potential future stock performance.
Technical Analysis
The company's stock closed at $58.40 on July 19, 2023, marking an 8.25% increase, y-o-y. The price of the stock has fluctuated between a low of $54.89 and a high of $61.50 during the last trading session. Even more significantly, the stock has seen a high of $61.50 and a low of $11.93 over the past year, highlighting considerable volatility.
The trading volume was around 22.71 million shares, significantly above its average volume of about 9.97 million shares. An unusually high trading volume can typically indicate increased investor interest and can lead to more significant price movement in the stock.
Comparing the 50-day moving average ($31.16) and the 200-day moving average ($21.04), it becomes evident that UPST has been on a strong upward trend. Furthermore, the three-month Moving Average Convergence Divergence (MACD) of 3.07 typically signals underlying bullishness.
The Relative Strength Index (RSI14) is at a high level of 90, often considered overbought. Although this usually signals a short-term price correction is due, it could also indicate a strong momentum that could continue to drive the price higher.
Fundamental Analysis
UPST's market capitalization stands at approximately $4.83 billion, representing the total market value of the company’s outstanding shares. However, with a negative EPS of -$3.46 and a negative PE ratio of -16.88, its financial performance appears to be quite concerning. IPO stocks typically have negative EPS due to heavy investment into growth.
Regarding the Discounted Cash Flow (DCF), a valuation method that estimates the value of an investment based on its expected future cash flows, the company's DCF currently sits at $63.50.
Concerning analyst targets, the median price target stands at $20.50, considerably lower than the current trading price, suggesting that the stock might be exceeding its intrinsic value. However, the highest target reaches $180, indicative of some potential upside.
News Analysis
Recent news coverage reveals a mixed sentiment towards UPST. While the company's shares have seen significant gains recently, driven in part by a suspected short squeeze, there are also cautionary voices. However, the market sees massive potential upside for UPST in potential short squeeze scenarios, as nearly 40% of the company's float is currently being sold short.
Stock Prediction
Despite the overbought RSI14 and negative EPS, the increase in volume, upwards trend in moving averages, and the recent news about the hefty short interest suggest that the stock could stage another run-up in the short-term. Accordingly, the stock might edge higher on July 20, 2023, and could likely see a positive performance in the following week.
Final Evaluation
Taking into consideration the technical indicators, the significant gap between the 50-day and 200-day moving averages, the elevated trading volume, and analyst target consensus, combined with the significant short interest and increasing market sentiment, UPST appears to be a Hold for now. In the short term, a potential short squeeze could provide some upside. However, caution is advised due to its overbought condition and the negative fundamentals, which point to a potential correction in the long term.
