<News alert> 3Q23 revenue missed, tough lending landscape drives downbeat earnings outlook
- Upstart reported revenue of $135m, falling short of expectations of $140m
- 4Q guidance missed market consensus, tough lending landscape drives downbeat short-term outlook
- While efforts to improve efficiency started to payoff
Upstart reported revenue of $135m, falling short of expectations of $140m. Revenue fell 14% y-o-y to $135m and came in below consensus of $140m, mainly due to fewer loans originated by lending partners amid a higher interest rates environment. Upstart reported a 3Q adjusted loss of 5 cents a share, wider than consensus that called for a loss of 2 cents a share.
4Q guidance missed market consensus, tough lending landscape drives downbeat short-term outlook. Upstart expects $135m in revenue, lower than consensus of $153m. The rapid inflection in monthly annualized loss rates should drive higher APR pricing and reduce borrower demand. The growth in the short-term is also likely to be constrained by banks being cautious about lending and investors remaining wary of buying loan portfolio.
While efforts to improve efficiency have started to payoff. The launch of new products and increased approval rates indicate the company’s strategy for improving loan model calibration has started to payoff. We believe that with the improved efficiency and the recent capital arrangement, Upstart should grow quickly and profitably when it returns to a normalized economy. Maintain HOLD, cut TP to US$24.