Kim BoltonUpstart HoldingsUPSTWEAK BUYFeb 02, 2022

UPST is running with negative cash flow, but good earnings growth is expected this year. It has some debt and is relatively small, which adds risks. Its last quarter was mixed (a beat on earnings, a miss on revenue). Short interest is very high at 27%, so good results could result in a squeeze. In the last three quarters the stock fell sharply after the news. But in the three before that, it rose sharply. The company is highly sensitive to the economy and rates. It is not too expensive at 23X earnings. Still, with negative momentum we think risks are too high here, and we would be fine selling this. 
Unlock Premium - Try 5i Free

The quarter and outlook were very solid, and this is the second very strong Q in a row, and the stock has regained lots of momentum. EPS could be 70% next year, after a shift from a loss to a profit this year. The 23% short position will likely continue to cover. We think investors can hold this now.
Unlock Premium - Try 5i Free

Just reported a bad quarter, but management tried to paint a rosy picture during the conference call. Revenues missed, adjusted RPS loss was more than expected, and transaction volume is -34% YOY. What are these guys smoking?

A Covid stock, part of the buy-now, pay-later group that had its day. In late 2021, it peaked around $400, plunged to the low teens two years later, then rebounded somewhat, but is still way past its highs. These stocks got killed as soon as the Fed announced it would raise interest rates, leaving behind the days of very low rates.

It's a huge short squeeze like Gamestop was, but the shorts can go only so far like what happened with Gamestop and AMC. So take profits now.

A key investing lesson is not to buy a damaged company (though buy a damaged stock). UPST sank from $400 at peak to around $11. The trick is to buy or sell in tranches to minimize losses.

UPST had its big decline because it had to take loans onto its balance sheet. The recent deal goes a long way in resolving this concern. It does use data to price loans, but we are not sure if it is the 'AI play' that some think. The rally we think is likely largely short covering. However, when a stock goes from 'almost bankrupt' to growing again it can still have a big move, and longer than one might think. Its guidance was solid, so fundamental buyers may come back here and continue to support it. 
Unlock Premium - Try 5i Free

It's a short squeeze, and not doing well.

It's in a short squeeze and not doing well. Their numbers were cut again yesterday. There are a number of bad loans.