Sign InUpstart Holdings Inc. (UPST) Shows Bullish Momentum Despite Overbought Condition
Summary
Upstart Holdings Inc.'s stock experienced a decline on July 27th, 2023, but remains well above its moving averages, indicating bullish momentum; however, the stock is currently overbought and could potentially see a pullback, and potential investors should exercise caution due to the company's lack of profitability, while current shareholders may benefit from holding their positions.
Technical Analysis
Upstart Holdings Inc. (UPST) ended its trading session on July 27, 2023, with a decline of -8.14% to a closing price of $58.94. The day's range was significant, with a low of $57.43 and a high of $67.22. The stock is currently well above its 50-day moving average of $36.28 and its 200-day moving average of $22.14, indicative of bullish momentum.
The relative strength index (RSI) read at 75, suggesting the stock is currently in an overbought condition. Overbought stocks can often indicate a possible pullback or correction shortly. The stock's MACD, a trend-following momentum indicator, stands at 7.14, indicating positive momentum.
The trading volume for UPST that day was 14.96 million shares, higher than the average volume of 11.18 million shares. When a stock trades significantly higher than its average volume, it generally indicates strong investor interest and can signal a trend change.
Fundamental Analysis
Upstart Holdings, Inc., currently has a market capitalization of roughly $4.87 billion with approximately 82.67 million shares outstanding. Its earnings per share (EPS) stands at -$3.82, and the company has a negative price-to-earnings ratio of -15.43, indicating that the company is not profitable at this time.
Despite the company currently lacking profitability, analysts have target prices ranging from a low of $10 to a high of $180. The consensus target is pegged at $40.89, while the median prediction is $20.5. These mixed expectations might mirror the firm's current struggles and potential growth if the company's new home loan product performs well.
Recent news highlights a product launch of a new home loan offering that could allow Upstart to capture a larger market share. Other news mentions the anticipation of a strong top-line beat for the quarter, a positive sign for investors.
Earnings and DCF Analysis
The earnings announcement is expected on August 8, 2023. Given the recent rise in stock price and news of an anticipated strong earnings beat, this report could significantly affect future movement.
Additionally, the discounted cash flow (DCF) analysis values UPST at $64.04, higher than the current price. Valuation by DCF is a method used to estimate the attractiveness of an investment opportunity. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be attractive.
Short-Term Forecast
For the next trading day, July 28, 2023, the recent heavy trading volume and price instability could continue. Given this, UPST might experience continued volatility. Over the next week, the price will likely continue to remain high, provided the market sentiment remains positive, and the upcoming earnings release does not disappoint.
Conclusion: Hold
Given the stock's current overbought condition and its unprofitable status based on EPS and negative PE ratio, it is advisable for potential investors to exercise caution. However, considering the expectations of a strong quarter and anticipation around its home loan product, it might be a good idea for current shareholders to hold their positions to benefit from the potential upside. This stock might not be a suitable pick for value investors, given its negative profitability ratio and significant premium over both 50-day and 200-day moving averages. Therefore, despite the optimism surrounding the company's product developments and upcoming earnings, it is recommended to hold on any purchasing decision.
