Sign InUpstart Holdings, Inc. (UPST) Faces Contrasting Signals Amid Short Squeeze Surge
Summary
Upstart Holdings, Inc. (UPST) experienced a 1.97% gain on July 18, 2023, closing at $53.95, with mixed news sentiment and conflicting technical indicators suggesting an ongoing short squeeze but potential financial challenges, making it a Hold in the short term and a Sell in the longer term.
Fundamental Analysis
Upstart Holdings, Inc. (ticker: UPST), a member of NASDAQ, closed on July 18, 2023, at $53.95 which indicates a 1.97% gain from the previous trading day. This relative performance is underpinned by the day's low and high price points of $51.87 and $55.94, respectively. Historically, UPST has been trading at a year low of $11.93 and recently reached its year high of $55.94.
Its market capitalization of $4.46 billion is complemented by a daily trading volume of 12.35 million shares, slightly exceeding the average trading volume of 9.79 million shares. There are approximately 82.67 million shares of UPST outstanding.
In terms of earnings, UPST's earnings per share (EPS) stands at -$3.46, and its price-to-earnings (P/E) ratio is -15.59. It is important to note the negative earnings and P/E ratio suggest company's financial struggles. This supports the recent news draws attention to UPST's poor AI performance that led to the company's struggle.
Furthermore, the looming issue is the company's discounted cash flow (DCF) value, which was measured at $59.05. This is higher than the recent closing price, indicating a potential undervaluation. The median target price set by analysts is significantly lower at $20.5, but there is a wide range of price targets from $10 to $180.
Technical Analysis
The 50-day moving average for UPST is $30.33 and the 200-day moving average is $20.88, both of which are now considerably lower than the current price. The Moving Average Convergence Divergence (MACD) for the past 3 months is 2.56, revealing a positive trend.
A comprehensive part of this technical analysis is UPST's 14-day Relative Strength Index (RSI) of 88. This suggests that UPST might be currently overbought as conventional interpretation perceives any RSI above 70 as a sign of overbuying.
News Analysis
The news concerning UPST is a mixture of rising optimism and considerable scepticism. On one hand, nearly 40% of Upstart's float being sold short signals increased investors' bearish sentiment. Conversely, the surge in UPST's stock price can be attributed to an ongoing short squeeze, pumped up by mild inflation readings and optimism over a soft landing for the financial sector. Importantly, the sustained bullish market momentum offers potential lucrative investment opportunities for investors.
Stock Performance Prediction and Final Evaluation
The technical indicators signal an overbought scenario and the fundamentals reveal potential financial challenges. Nevertheless, the current bullish market sentiment is causing the stock's price to surge. Therefore, the stock's price could continue to rise in the short term due to ongoing short squeeze.
In light of the upcoming week, anticipating a precise stock direction can be tricky due to the contrasting signals. However, with the RSI being high, the stock may face a potential price correction.
Given the above analysis, UPST could be considered a 'Hold' in the short term due to the short squeeze but could be seen as 'Sell' in a longer term due to financial struggles and high RSI. Therefore, investors should closely monitor this stock and re-evaluate it following future news or financial data releases.
