Sign InUpstart Holdings, Inc.'s Stock Shows Decrease, Strong Growth Potential Despite Overvaluation Concerns
Summary
Upstart Holdings, Inc.'s stock closed lower on July 21, 2023, indicating a potential short-term pullback, but the strong upward trend, positive market sentiment, and potential future growth suggest an increase in stock price by the end of the week; however, caution and monitoring of the company's forthcoming earnings announcement are advised due to volatility and negative EPS, leading to a classification of Hold for UPST.
Technical Analysis
Upstart Holdings, Inc.'s (UPST) stock closed at $54.17 on July 21, 2023, showing a decrease of $1.22 (or 2.20%) compared to the previous trading session. The stock's trading volume stood at 8.75 million, which is below the average 10.48 million, indicating less interest from investors.
The stock has recorded a dramatic surge from a 52-week low of $11.93 to a high of $61.50. UPST's 50-day moving average stands at $32.91, significantly below the recent close price, highlighting a strong upward trend in price short term. The 200-day moving average is even lower, at $21.40, suggesting a solid long-term bullish trend.
The relative strength index (RSI) is at 78, indicating an overbought condition. This might suggest that the stock might experience a short-term pullback in the near future. The moving average convergence divergence (MACD), a key indicator of a stock's momentum, has a positive reading, suggesting continued upward movement.
Fundamental Analysis
Upstart Holdings, Inc. is a growth-oriented company with a negative EPS of -$3.55, reflecting a loss incurred by the company. This has resulted in a negative P/E ratio of -15.26. Despite the losses, market sentiment remains bullish, with the stock's market capitalization standing at $4.48 billion, and outstanding shares at 82.67 million. This suggests that the market is counting on future growth to justify the current valuations.
The discounted cash flow (DCF) model, a measure of intrinsic value, reveals a figure of $59.27, implying that the stock could potentially be undervalued even at the current high valuation. The analysts' target prices for UPST range from a low of $10.00 to a high of $180.00, with a median target of $20.50 and a consensus target of $40.89. These targets suggest that significant uncertainty exists about the company's future performance, with some analysts optimistic about its growth potential, and others wary of its valuation..
News and Outlook
Recent news indicates that UPST is seen as a growth stock with comments highlighting its potentially lucrative AI platform. However, there are concerns about the stock's surge and whether it will sustain. Upstart's exposure to macroeconomic factors and concerns of being overvalued are risks for investors to consider. Upstart is anticipated to announce its earnings on 08/08/2023, which might provide more clarity on its future growth prospects.
Prediction
Based on the aforementioned data and bearing in mind that the stock is considered overbought (RSI), there might be a slight pullback in the stock's price on the next trading day, July 24, 2023. However, considering the strong upward trend (50-day and 200-day moving averages), bullish market sentiment, and potential future growth, an increase in the stock price is expected by the end of the week. It is also important to monitor the company's forthcoming earnings announcement, as this could significantly influence the stock's performance.
Final Evaluation
Despite the current overbought condition and concerns about overvaluation, the long-term growth potential of Upstart Holdings, Inc., as reflected in the strong market capitalization, high analyst price targets, DCF valuation, and positive news sentiment, suggests potential for future growth. Caution is advised due to the stock's volatility and negative EPS. Therefore, it is classified as a Hold, suggesting that investors should wait for more tangible signs of sustained profitability before committing more capital to UPST.
