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Upstart UPST, the AI-driven fintech innovator changing the way creditworthiness is assessed, is ripe for a buy today with a couple of key support levels ready to maintain its recent buoyancy, following an overdone sell-off last month.
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November was a horrendous month for the top fintech innovators, with Cathie Wood’s ARK Invest Fintech ETF ARKF, the benchmark for next-generation digital-finance, falling over 25%. Investors were selling growth indiscriminately, creating some excellent buying opportunities for the best-positioned fintech equities.
UPST has seen significant valuation compression from its mid-October highs at $400, but the over 1,500% gain it saw from its IPO last December may have been a little overzealous. Now, with the stock now 55% below those highs it’s time to consider adding UPST to your portfolio.
Upstart’s 1.5-month capitulation was catalyzed by profit-pulling in the face of Q3 earnings coupled with the Fed’s accelerating tapering timeline, which has valuation compressing impacts on this fintech giant, do to its outsized growth outlay (analysts expecting to see 250% topline appreciation in 2021).
UPST found critical support at a vital Fib-derived level around $160, where the markets put in a bottom. UPST is now above its 50-day moving average (new support level sitting at $180) and on its way back above $200 a share. Upstart announced an expanded partnership with First National Bank of Omaha this morning, fueling further momentum into this niche fintech powerhouse.
I am looking at a UPST price target of $300+ with quarterly performance continuously outpacing even the most optimistic analysts. Upstart is looking at an unprecedented profitable growth outlook, and with most fresh fintech startups not even able to post positive earnings, UPST is more attractive than ever.
The Business
This AI-powered cloud incepted fintech business is changing the way banks assess creditworthiness. Many fintech giants are competing against banks, but Upstart has decided to partner with them in its next-generation offering. This is an excellent position to be in as a high growth company in a rising interest rate environment, because higher rates means more profits for banks which I have no doubt will drive significant demand for Upstart’s one-of-a-kind product offering.
The AI platform uses more than 1,600 differing variables before coming to the conclusion of creditworthiness compared to the typical bank, which only looks at 8-15 and the most sophisticated models 30.
Upstart’s CEO David Girouard said his lending algorithm is 5 times more effective than current systems at accurately depicting a person’s ability to repay a loan. Saying that on a scale of 1-100, the current credit regimes are only at about 2 on predicting risk of default, and David believes his AI platform would put banks at closer to a 10, with still a lot more room to grow. Upstart’s AI is continuously learning and will continue to be more effective as it is provided with more datasets.
Happy Trading!
Dan
For more headline-fueled trades and insight, checkout my daily market commentary in the Headline Trader portfolio
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