Upstart (UPST +1.95%), the AI lending platform, has been a publicly traded company for nearly six years, and it’s taken investors on a wild ride.
After going public at the end of 2020, the stock skyrocketed during the heady bull market, and the business posted triple-digit revenue growth and strong profits thanks to low interest rates and stimulus payments during the pandemic.
However, Upstart’s momentum unwound in 2022 as interest rates rose, and the stock crashed, losing more than 95% of its value at one point.
Today, after years of bouncing up and down, the stock continues to trade at around $25 per share and has a market cap of just $2.5 billion.
While the business is in much better shape than it was a few years ago, as it’s both growing rapidly and profitable on a generally accepted accounting principles (GAAP) basis, investors seem to have moved on, and that could be a huge opportunity.
Image source: Getty Images.
What’s the misunderstanding
Speaking to The Motley Fool, Upstart CEO Paul Gu explained that Upstart had gone through three or four cycles of misunderstanding with investors as the stock has reacted to macro issues like rising interest rates or liquidity shortages over the years.
Gu acknowledged that the company could have done a better job of being clear with the market of what was under the company’s control and what metrics it should be judged on. He characterized the gap between investor perception and the reality of the business as “quite severe,” adding, “I don’t think you can find hardly any companies growing at that rate (that we are) that are profitable that trade at multiples anywhere in our neighborhood.”
Indeed, Upstart trades at a price-to-sales ratio of roughly 2, which doesn’t seem to reflect its growth potential. If it had a software-as-a-service business model, it would likely have a P/S ratio of at least 10.
Upstart is also a much more resilient business than it was a few years ago. After experiencing a funding and liquidity crisis in late 2022 as interest rates jumped, Upstart now has committed capital partners like Castlelake and Fortress that guarantee funding for the loans it originates on its platform.
It’s also in the process of securing a bank charter, which will make it easier to launch new products, enter new states, and generally streamline the business, helping it both cut costs and increase revenues.
Where Upstart stands today
Through the first half of 2026, Upstart has delivered strong growth, with revenue up 35% to $625 million, and it earned a $0.10 per share GAAP profit. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $117.4 million.
The company’s core personal loans business is highly profitable, but it’s using that capital to fund investments in new businesses like home and auto loans, both of which are growing rapidly and represent massive addressable markets.
The company continues to target a compound annual growth rate of 35% from 2025 to 2028, and expects a 25% adjusted EBITDA margin in 2028. That would give it revenue of about $2.6 billion in 2028 and adjusted EBITDA of $650 million.
Today’s Change
Current Price
Can Upstart 10x?
Upstart is a unique company. Gu said it doesn’t consider competition to be a significant factor and is more focused on winning over customers and partners by demonstrating that it has the best lending product, meaning it’s the best at analyzing and predicting credit risk.
Given that credit is a huge market and the advantages of its AI technology, Upstart has significant long-term growth potential, and it’s starting to pull some of those levers, including launching home and auto loans and filing for the Upstart Bank charter.
If Upstart can continue to deliver profitable growth in the 35% range, the stock will eventually respond. If it gets some help from the macro environment and interest rates start to fall, it wouldn’t be surprising to see the stock skyrocket from here. A 10x gain is definitely a possibility.
