Upstart Holdings Inc. (NASDAQ: UPST) tanked more than 18% on August 6th, even though the AI lending platform reported blockbuster results for its second financial quarter (Q2).
According to the company’s earnings release, its revenue more than doubled on a year-over-year basis to $257 million, fuelling a swing to $5.6 million in profit in the recently concluded quarter.
UPST share price action is particularly surprising because the management guided for continued profitability and raised its estimate for full-year revenue as well on Wednesday.
For long-term investors, however, the post-earnings dip in Upstart stock today may have created a compelling entry point into a company showing accelerating momentum across multiple lending verticals.
Why Upstart stock slipped following Q2 earnings
While the UPST price action following earnings release looks disconnected from the company’s financial performance on the surface, there’s still some explanation as to what may have triggered it on Wednesday.
For starters, the fintech now has over $1.0 billion in loan volume on its balance sheet – up roughly 25% sequentially.
While this signals strong demand, it also introduces direct credit risk.
Upstart stock crashed on market open today because investors may be uneasy with its exposure to potential defaults, especially in a high-rate environment.
Additionally, operating cash flow turned negative, highlighting liquidity concerns. Together, these updates may have spooked short-term investors – leading to a sharp decline in UPST stock despite upbeat guidance.
Why UPST shares are worth buying on the dip
While Upstart shares are up nearly 100% even after the post-earnings decline, they’re still worth buying on the pullback since underneath the volatility lies a company executing impressively on its growth strategy.
In its financial release, the Nasdaq-listed firm said auto loan volume increased 87% sequentially to $114 million while home equity originations went up 67% to $68 million.
These two numbers alone make a strong case for owning UPST stock as both are massive markets – roughly $700 billion for auto and over $35 trillion in untapped home equity – and Upstart is just beginning to scale.
For long-term investors, this is a growth story still in its very early innings.
Is Upstart stock a millionaire-maker?
Upstart Holdings sure has the potential to emerge as a millionaire-maker over time. A 10x increase would still place its market cap at about $66 billion only which isn’t unheard of for a fintech firm leveraging artificial intelligence to enhance its offerings.
The company’s AI-powered underwriting is improving conversion rates and expanding access to credit, even in a tough macroeconomic environment.
If interest rates ease and demand rebounds, Upstart’s newer verticals could scale rapidly.
While risks remain, especially around funding and credit exposure, early traction is undeniable.
For investors with a multi-year horizon, Upstart stock could be one of the most compelling fintech bets right now.
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