Upstart Holdings Inc. recently faced a notable downturn in its stock performance following the announcement of its third-quarter financial outcomes. Despite achieving an adjusted net income that exceeded market predictions, the company struggled with transaction volumes and fee revenues, which did not meet anticipated figures. This performance led several financial analysts to reevaluate their outlooks, resulting in downward adjustments to their price targets for the firm.
The financial institution's latest quarterly report has sparked a conversation among investors and analysts regarding its future trajectory amidst a challenging economic landscape. The discrepancy between strong earnings and weaker operational metrics suggests that while the company managed its profitability, its core business functions, such as loan origination and related income, faced headwinds. These factors are crucial for understanding the market's reaction and the subsequent revisions in expert financial projections.
Upstart's Mixed Q3 Performance and Market Response
Upstart Holdings Inc. witnessed a decline in its stock value immediately following the release of its third-quarter earnings. Despite surpassing analyst estimates for adjusted net income, the company's transaction volumes and fee revenues did not meet expectations. This divergence prompted analysts from leading firms like Stephens and Needham to lower their price targets, highlighting concerns over a challenging economic climate that has affected loan interest rates and customer conversion. BTIG also maintained a Neutral stance, emphasizing the shortfall in key revenue drivers and the anticipated impact on future profit margins.
The company's adjusted net income reached $32 million, significantly exceeding the Street's projection of $8 million, translating to 52 cents per share against an expected 42 cents. However, transaction volumes, although growing 80% year-over-year to $2.85 billion, fell short of forecasts. Revenue from fees, totaling $258.5 million, also missed the consensus of $275.7 million, attributed to the company's strategic decision to increase loan pricing and reduce approval rates in response to the macroeconomic environment. Net interest income, however, provided a positive surprise, reaching $18.6 million, largely due to strong credit performance and elevated loan balances. Upstart's guidance for the fourth quarter and full-year revenues of $288 million and $1.04 billion respectively, while representing significant growth, still fell below analyst consensus, leading to expectations of softer near-term transaction volume growth.
Analyst Perspectives on Upstart's Outlook and Strategy
Following Upstart's mixed third-quarter results, financial analysts offered varied but predominantly cautious perspectives. Kyle Joseph from Stephens maintained an Equal-Weight rating but reduced his price target from $55 to $40, acknowledging the earnings beat but expressing concern over the transaction volume miss and the anticipated slowdown in near-term growth. Kyle Peterson of Needham reaffirmed a Buy rating, yet cut his price target from $82 to $56, noting the impact of Upstart's underwriting model adjusting to macro conditions by raising prices and lowering approval rates, which affected revenue from fees.
Vincent Caintic of BTIG retained a Neutral rating, pointing out that October 2025 originations were still influenced by the elevated Upstart Macro Index (UMI) from Q3. He explained that a higher UMI led to increased loan interest rates, consequently impacting conversion rates and reducing transaction volumes. Despite the EBITDA and earnings beat in the third quarter, Caintic highlighted that the fourth-quarter guidance indicated lower contribution margins. These analyst views collectively underscore a cautious outlook for Upstart, emphasizing the challenges posed by the current economic climate and the company's strategic responses, which are designed to mitigate risks but also have an immediate impact on growth metrics.