UPST Stock Risk & Deep Value Analysis
Upstart Holdings Inc
Financial Services • Credit Services
DVR Score
out of 10
What You Need to Know About UPST Stock
We analyzed Upstart Holdings Inc using our deep value framework. Sign in to see our full verdict and DVR Score.
We ran UPST through our deep value framework — analyzing financial health, distress signals, competitive moat, and risk factors. Our risk assessment: Aggressive. Here's what we found.
UPST Risk Analysis & Red Flags
What Could Go Wrong
The ongoing securities class action lawsuit, alleging materially false and misleading statements about business operations and Model 22 performance from May 14, 2025, to Nov. 4, 2025, could result in significant financial penalties, large legal fees, and severe reputational damage. This could undermine trust in Upstart's core AI technology, deter new bank partners, and lead to reduced origination volume, directly threatening its 'capital-light' growth strategy and future revenue streams.
Risk Matrix
Overall
Aggressive
Financial
High
Market
Medium
Competitive
Medium
Execution
High
Regulatory
Medium
Red Flags
- ⚠
Securities class action lawsuit alleging 'materially false and misleading statements and omissions' about the business and Model 22 performance.
- ⚠
Q1 2026 GAAP EPS showing a widening net loss of ($0.07) and sequential decline in contribution margin to 50%.
- ⚠
Institutional ownership decreased by 49.11 percentage points in Q1 2026, indicating significant institutional selling pressure.
- ⚠
Insider (Scott Darling) filed Form 144 on June 9, 2026, for a proposed sale of 6,634 shares valued at $190,912, signaling some executive selling.
Upcoming Risk Events
- 📅
Adverse ruling or significant settlement in the securities class action lawsuit (e.g., settlement exceeding $50M) leading to substantial financial penalties or reputational damage, potentially slowing partner acquisition.
- 📅
Further sequential decline in contribution margin (e.g., below 45% in Q2 2026) indicating worsening unit economics and difficulty in achieving profitability.
When to Reconsider
- 🚪
Exit if Q2 2026 earnings (2026-07-31) show a net loss greater than ($0.10) per share, indicating further deterioration of profitability.
- 🚪
Sell if the stock price breaks significantly below $25.00 on high volume without fundamental positive news, signaling loss of investor confidence and further technical breakdown.
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What Does Upstart Holdings Inc (UPST) Do?
Market Cap
$2.92B
Sector
Financial Services
Industry
Credit Services
Employees
1,193
Upstart Holdings, Inc., together with its subsidiaries, operates a cloud-based artificial intelligence (AI) lending platform in the United States. The company operates through three segments: Personal Lending, Auto Lending, and Other. Its platform includes personal loans, automotive retail and refinance loans, home equity lines of credit, and small dollar loans. Upstart Holdings, Inc. was founded in 2012 and is headquartered in San Mateo, California.
Visit Upstart Holdings Inc WebsiteInvestment Thesis
If Upstart can successfully resolve the ongoing securities class action lawsuit without substantial financial penalties or reputational damage, and simultaneously demonstrate a clear path to sustained GAAP profitability with contribution margins recovering above 55% in Q2 2026, then the stock could re-rate towards a P/S multiple of 4-5x on its reaffirmed FY26 revenue guidance of $1.4B, implying a price target of $55-$70. This is bullish because the current valuation does not fully price in the resolution of legal risks or a return to solid profitability.
Is UPST Stock Undervalued?
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UPST Price Targets & Strategy
12-Month Target
$40.00
Bull Case
$55.00
Bear Case
$20.00
Valuation Basis
Based on a forward P/S of 3.0x applied to reaffirmed FY26 revenue guidance of $1.4B, consistent with current analyst mean target and acknowledging recovery potential if legal risks are mitigated.
Entry Strategy
Given high uncertainty, consider a cautious entry via dollar-cost averaging only if stock stabilizes above $30.00. Optimal entry would be a dip toward $25-$28, if it holds, suggesting previous support and limited further downside on current news.
Exit Strategy
Take 50% profit at $40.00 (mean analyst target). Consider full exit or stop-loss at $25.00 if legal pressures intensify or profitability further deteriorates.
Portfolio Allocation
1-3% for aggressive risk tolerance only, given the significant legal and financial uncertainties.
Price Targets & Strategy
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Is UPST Financially Healthy?
Valuation
P/E Ratio
59.09
Forward P/E
17.04
EV/EBITDA
-47.88
PEG Ratio
0.10
Price/Book
13.95
Price/Sales
7.42
Profitability
Gross Margin
82.18%
Operating Margin
4.11%
Net Margin
4.34%
Return on Equity
7.29%
Revenue Growth
57.69%
EPS
$0.44
Balance Sheet
Current Ratio
2.15
Quick Ratio
2.15
Debt/Equity
2.29
Total Debt
$74.00M
Cash & Equivalents
$909.00M
Cash Flow
Operating Cash Flow
$278.00M
Free Cash Flow
$252.00M
EBITDA
-$176.00M
Other
Beta (Volatility)
2.34
Does UPST Have a Competitive Moat?
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🛡️ Narrow
Moat Trend
Eroding
Moat Sources
2 Identified
The moat, primarily derived from its AI models and accumulated data, is under significant threat due to allegations of 'materially false and misleading statements' and issues with 'Model 22.' If the core competence of its AI is called into question, the moat's durability diminishes, as competitors can potentially replicate or outperform without similar reputational damage.
Moat Erosion Risks
- •Adverse outcome of the securities class action lawsuit, damaging the credibility of Upstart's AI models.
- •Increased competition from traditional banks developing their own AI solutions or other fintechs offering superior credit models.
- •Regulatory changes that restrict AI-driven lending practices or mandate higher transparency/explainability than Upstart currently provides.
UPST Competitive Moat Analysis
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UPST Market Intelligence
Sentiment & Insider Activity
Social Sentiment
Neutral, with discussions likely split between long-term AI potential and immediate legal/profitability concerns.
Institutional Sentiment
Negative, reflected by the 49.11% decrease in institutional ownership in Q1 2026 and a mixed analyst consensus (6 Buy, 6 Hold, 1 Underperform) with a mean target implying moderate upside.
Insider Activity (Form 4)
Scott Darling filed Form 144 on Jun 09, 2026, for a proposed sale of 6,634 shares valued at $190,912.00, dated 05/20/2026. This indicates some insider selling.
Options Flow
Normal options activity (no specific unusual options activity data provided in research, so assuming normal).
Earnings Intelligence
Next Earnings
2026-07-31
Surprise Probability
Medium
Historical Earnings Pattern
Historically, Upstart has shown volatility around earnings, reacting strongly to changes in growth outlook, profitability trends, and credit performance of its loan portfolio. Positive guidance or strong origination volumes tend to spark rallies, while margin pressures or credit concerns lead to sell-offs.
Key Metrics to Watch
Competitive Position
Top Competitor
SOFI
Market Share Trend
Gaining ground within the AI-powered personal loan segment, driven by new bank partnerships, but overall market share data is not explicitly provided. Model performance allegations could hinder future gains.
Valuation vs Peers
While Upstart has historically traded at a premium due to its pure-play AI model and growth potential, the current legal and profitability issues likely place its valuation (e.g., P/S of ~2.3x forward) at a discount to faster-growing, more profitable fintech peers not facing similar legal overhangs.
Competitive Advantages
- •Proprietary AI lending model capable of assessing credit risk beyond traditional FICO scores.
- •Capital-light business model, leveraging bank partners to originate and hold loans.
- •Significant historical data on loan performance to refine AI models.
Market Intelligence
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What Could Drive UPST Stock Higher?
Near-Term (0-6 months)
- •Q2 2026 earnings on 2026-07-31: Strong revenue beat coupled with a clear path to GAAP profitability or a significant improvement in contribution margin above 55%.
- •May 2026 origination volume published June 3, 2026: Continued strong origination growth could signal sustained demand and model performance amidst macro uncertainty.
Medium-Term (6-18 months)
- •Resolution or favorable update on securities class action (e.g., motion to dismiss granted, or a minor settlement): Removing the legal overhang could re-rate the stock.
- •New strategic partnerships with major banks (e.g., announcing 5+ new bank partners leveraging Upstart's platform within 12 months): Validation of the capital-light model and broad adoption.
Long-Term (18+ months)
- •Diversification into new loan categories (e.g., successful scaling of auto or small business lending to represent >25% of total revenue by 2028) leading to new TAM expansion.
- •Achieving sustained GAAP profitability and positive free cash flow (e.g., >$100M FCF annually by 2029) proving the long-term viability and scalability of the AI-lending model.
Catalysts & Growth Drivers
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What's the Bull Case for UPST?
- ✓
Watch for any updates or disclosures regarding the securities class action lawsuit's progression or settlement discussions.
- ✓
Monitor Q2 2026 earnings report for sequential improvement in GAAP net income and a rebound in contribution margin above 50%.
Bull Case Analysis
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Competing with UPST
See how Upstart Holdings Inc compares to related companies
| Company | Market Cap | DVR Score | P/E | Revenue | Profit Margin | Rev Growth | |
|---|---|---|---|---|---|---|---|
Upstart Holdings Inc UPST | $2.9B | 3.4 | 59.1 | $737.0M | 4.3% | 57.7% | |
Bank of America Corp BAC | $366.2B | 0.1 | 11.6 | — | 30.2% | 99.4% | Compare → |
JPMorgan Chase & Co JPM | $831.2B | 0.9 | 14.1 | $177.0B | 33.3% | 109.0% | Compare → |
SoFi Technologies Inc SOFI | $21.3B | 8.4 | 36.9 | $3.9B | -19.8% | 205.5% | Compare → |
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How Upstart Holdings Inc Makes Money
Upstart Holdings Inc. is an AI lending platform that partners with banks and credit unions to provide consumer loans using its proprietary artificial intelligence models, rather than traditional credit scores like FICO. It makes money primarily by charging referral fees to banks for originating loans through its platform and by selling servicing fees to banks that buy the loans. The company also retains a small portion of originated loans on its balance sheet, taking on credit risk for those. Its technology aims to broaden access to credit and reduce default rates for lenders by evaluating a wider array of data points.
Read Full Business Model BreakdownFAQ
What is the DVR Score for Upstart Holdings Inc (UPST)?
As of June 13, 2026, Upstart Holdings Inc has a DVR Score of 3.4 out of 10, placing it in the "Risk Trap" category. This score is generated by our AI-powered deep value analysis framework that evaluates growth potential, financial health, competitive moat, and risk factors.
What is the market capitalization of Upstart Holdings Inc?
Upstart Holdings Inc's market capitalization is approximately $2.9B. The company operates in the Financial Services sector within the Credit Services industry.
What ticker symbol does Upstart Holdings Inc use?
UPST is the ticker symbol for Upstart Holdings Inc. The company trades on the NMS.
What is the risk level for UPST stock?
Our analysis rates Upstart Holdings Inc's overall risk as Aggressive. This assessment considers execution risk, market risk, financial risk, competitive risk, and regulatory risk. For a full breakdown, see the risk analysis section above.
What is the P/E ratio of UPST?
Upstart Holdings Inc currently has a price-to-earnings (P/E) ratio of 59.1. This is above the market average, suggesting the stock may be priced for high growth expectations.
Is Upstart Holdings Inc's revenue growing?
Upstart Holdings Inc has reported revenue growth of 57.7%. The company is showing strong top-line momentum.
Is UPST stock profitable?
Upstart Holdings Inc has a profit margin of 4.3%. The company is profitable but margins are modest.
How often is the UPST DVR analysis updated?
Our AI-powered analysis of Upstart Holdings Inc is refreshed regularly to incorporate the latest financial data, market conditions, and news. The most recent update was on June 13, 2026.
Important Disclaimer – Not Financial Advice
Deep Value Reports is an independent research platform for educational and informational purposes only. We are not financial advisors, investment advisors, or licensed professionals. The analysis, scores, and information provided on this page for UPST (Upstart Holdings Inc) should not be construed as personalized investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services.
All investments involve risk, including the potential loss of principal. Past performance does not guarantee future results. Always conduct your own research, consider your financial situation, and consult with a qualified financial advisor before making any investment decisions.