TLDR:
- Upstart (UPST) shares jumped 17.5% after Wedbush upgraded the stock to Neutral
- Wedbush raised the price target from $10 to $45
- Upstart announced a $2 billion partnership with Blue Owl Capital
- The stock hit a new 52-week high of $56.08
- Upstart’s shares are up 41.4% year-to-date
Upstart Holdings, the AI-driven lending platform, saw its stock price soar on Monday, October 14, 2024, following a significant analyst upgrade and the announcement of a major partnership.
Shares of Upstart (NASDAQ: UPST) jumped 17.5% in morning trading, reaching a new 52-week high of $56.08 before settling at $54.07, a 15% increase for the day.
The rally was primarily driven by Wedbush Securities’ decision to upgrade Upstart’s stock rating from Underweight (Sell) to Neutral. Wedbush analysts also raised their price target for the stock from $10 to $45, citing improved credit quality metrics, lower interest rates, and a more favorable Upstart Macro Index
. These factors are expected to contribute to a positive shift in loan originations and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in the second half of 2024.
Upstart’s stock has been known for its volatility, experiencing over 70 moves greater than 5% in the past year. However, this particular surge stands out as a significant market reaction, indicating renewed optimism about the company’s prospects. The stock is now up 41.4% since the beginning of the year, marking a substantial recovery from previous lows.
Adding to the positive momentum, Upstart announced a $2 billion consumer credit agreement with Blue Owl Capital, a leading alternative asset manager. Under this partnership, Blue Owl’s Alternative Credit strategy will purchase up to $2 billion in consumer loans from Upstart’s platform over the next 18 months. The deal kicked off with an initial acquisition of a $290 million personal loan portfolio in September.
This strategic partnership is expected to boost Upstart’s loan origination capacity and demonstrates growing confidence in its AI-driven lending model. Blue Owl’s involvement is anticipated to enhance Upstart’s ability to expand access to affordable credit for a wider range of consumers.
David Aidi and Ray Chan, Co-Heads of Financial Assets at Blue Owl Capital, expressed enthusiasm for the partnership, highlighting their commitment to leveraging data science and consumer market expertise. Upstart’s CFO, Sanjay Datta, noted that Blue Owl’s long-term vision aligns well with Upstart’s mission to democratize access to affordable credit through advanced AI technology.
The transaction was structured by Atalaya Capital Management LP, a well-known alternative credit manager, while ATLAS SP Partners, a financing and securitized products business majority-owned by Apollo funds, will provide debt financing for the loan purchases. This collaboration brings together leading players in the alternative credit space, further strengthening Upstart’s position in the market.
Despite the positive news, some analysts remain cautious about Upstart’s long-term prospects. Wedbush analysts noted that the key question moving forward is whether Upstart can scale originations significantly while maintaining credit metrics within desired parameters.
Upstart’s recent performance represents a significant turnaround from its previous struggles. Investors who bought $1,000 worth of Upstart’s shares at its IPO in December 2020 would now be looking at an investment worth $1,862, highlighting the stock’s volatile but ultimately positive trajectory.
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