Insights

Why Upstart Stock Is Sinking Today

What happened
Shares of Upstart (NASDAQ: UPST) are losing ground in Thursday’s trading. The consumer credit-focused fintech company’s share price was down roughly 6.8% as of 3:30 p.m. ET.
The Federal Reserve held its second meeting of the year yesterday and announced a 50 basis-point hike for interest rates that marked the biggest raise since 2000. Further spooking the market, the Fed also highlighted risk factors related to China’s latest round of pandemic-related lockdowns and the war between Russia and Ukraine.
Image source: Getty Images.

So what
Inflation is currently at its highest level in more than 40 years, and investors had broadly expected that the Fed would announce a 50 basis-point rate increase at yesterday’s meeting. However, the overall tone of comments from the meeting appear to have been significantly more hawkish than the market had anticipated.
The Fed will likely raise rates again at each of its five remaining meetings this year. While Chairman Jerome Powell said that the committee was not “actively considering” 75 basis-point rate hikes, the possibility of it even being mentioned appears to have spooked the market.
He also cautioned about supply challenges related to China’s new pandemic lockdowns and the potential for the situation in Ukraine to have unexpected economic consequences for the U.S. As if to highlight the latter risk factor, Russia began shelling regions in southern and eastern Ukraine with artillery fire today. 
Now what
Even after a dramatic pullback, Upstart stock is still up roughly 197.5% from market close on the day of its initial public offering in December 2020. The company now has a market capitalization of roughly $7.4 billion and is valued at approximately 5.3 times this-year’s expected sales and 37.5 times expected earnings.
Upstart’s artificial-intelligence driven approach to changing the ways that banks assess consumer credit risk could drive more impressive business momentum over the long term. However, the company’s growth-dependent valuation sets the stage for volatility if overall market sentiment continues moving in a bearish direction. 
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart Holdings, Inc. The Motley Fool has a disclosure policy. –

What happened

Shares of Upstart (NASDAQ: UPST) are losing ground in Thursday’s trading. The consumer credit-focused fintech company’s share price was down roughly 6.8% as of 3:30 p.m. ET.

The Federal Reserve held its second meeting of the year yesterday and announced a 50 basis-point hike for interest rates that marked the biggest raise since 2000. Further spooking the market, the Fed also highlighted risk factors related to China’s latest round of pandemic-related lockdowns and the war between Russia and Ukraine.

Image source: Getty Images.

So what

Inflation is currently at its highest level in more than 40 years, and investors had broadly expected that the Fed would announce a 50 basis-point rate increase at yesterday’s meeting. However, the overall tone of comments from the meeting appear to have been significantly more hawkish than the market had anticipated.

The Fed will likely raise rates again at each of its five remaining meetings this year. While Chairman Jerome Powell said that the committee was not “actively considering” 75 basis-point rate hikes, the possibility of it even being mentioned appears to have spooked the market.

He also cautioned about supply challenges related to China’s new pandemic lockdowns and the potential for the situation in Ukraine to have unexpected economic consequences for the U.S. As if to highlight the latter risk factor, Russia began shelling regions in southern and eastern Ukraine with artillery fire today. 

Now what

Even after a dramatic pullback, Upstart stock is still up roughly 197.5% from market close on the day of its initial public offering in December 2020. The company now has a market capitalization of roughly $7.4 billion and is valued at approximately 5.3 times this-year’s expected sales and 37.5 times expected earnings.

Upstart’s artificial-intelligence driven approach to changing the ways that banks assess consumer credit risk could drive more impressive business momentum over the long term. However, the company’s growth-dependent valuation sets the stage for volatility if overall market sentiment continues moving in a bearish direction. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart Holdings, Inc. The Motley Fool has a disclosure policy.

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