By Sam Boughedda
JPMorgan analysts started Upstart Holdings (NASDAQ:UPST) at Underweight with an $11 per share price target in a note Tuesday.
Upstart's AI-driven, two-sided marketplace brings together borrowers and lenders, leading to expanded credit access, explained the analysts, who added that the company benefitted from the pandemic stimulus, which drove consumer defaults to record lows.
However, more recently, defaults have increased, institutional demand for Upstart's riskier unsecured consumer loans has waned, and losses on the company's held-for-investment portfolio have swelled, according to the analysts.
"Shockingly, shares are up 28% YTD," declared the analysts. "While we like the longer-term potential of UPST's AIlending platform, the business is proving to be extremely cyclical and sensitive to the whims of its funding partners."
"We are initiating coverage at Underweight with an $11 December 2023 price target given funding headwinds, its growing onbalance sheet credit exposure, and uncertain near-term origination and profit outlook."