Upstart Holdings: New 12-Month Price Target
- LaFoy O. Thomas III, Esq.
- Mar 30
- 4 min read
Thomas Third Capital
Investment Research Report: Upstart (UPST)
March 30, 2025
Executive Summary
Upstart has emerged as a force in the lending landscape by connecting millions of borrowers with more than 100 banks and credit unions through its sophisticated artificial intelligence models and cloud-based applications. With a focus on increasing access to credit, including a 116% increase in Black borrowers and 123% more Hispanic borrowers approved compared to traditional models, Upstart is setting a new benchmark for financial inclusion and efficiency. At a current stock price of $47.29 and a market cap of $4.43 billion, Upstart’s valuation of 6.73 times trailing sales is compelling. We believe that, over the next 12 months, Upstart can justify a multiple expansion to 26 times sales, driving our price target to $291 per share, which is a market cap of approximately $27 billion.
Investment Thesis
Innovative Technology and Market Differentiation
Advanced AI-Driven Underwriting: Upstart’s artificial intelligence model, which leverages over 2,500 variables and is trained on approximately 82 million repayment events, significantly outperforms traditional lending models. This results in:
Approval of 101% more applicants
Lower APRs by 38% on average
Automation Excellence: With 91% of loans fully automated, Upstart reduces human error and operational costs, enhancing scalability and operational efficiency. This efficiency not only improves borrower experience, as evidenced by a world-class net promoter score of 84, but also drives higher conversion rates, with 93% of instantly approved borrowers converting to funded loans.
Impressive Growth Trajectory
Revenue Expansion: In Q4 2024, total revenue grew by 56% year-over-year to $219 million, with full-year revenue for 2024 at $636.5 million—a 24% increase. This growth is underpinned by improved model accuracy and larger conversion rates.
Earnings and Margin Improvements: Losses in Q4 2024 were significantly trimmed from $42.4 million to $2.5 million, while adjusted EBITDA reached $38.8 million. With a healthy contribution margin of 61%, Upstart’s operating performance is on an upward trajectory.
Robust Revenue Forecasts: Wall Street projects total revenue to grow by over 58% in 2025 to reach $1.01 billion and by more than 23% in 2026 to $1.24 billion. At Thomas Third Capital, we are even more bullish, expecting:
65% revenue growth in 2025 to at least $1.05 billion
50% revenue growth in 2026 to at least $1.575 billion
Diversified Loan Products and Expanding Market Opportunities
HELOC and Loan Portfolio Expansion: Upstart’s HELOC business has shown tremendous potential, with Q4 2024 originations growing sequentially by 59% to $27 million and zero defaults on over 1,000 HELOC loans. This product is now available in 36 states plus DC, meeting substantial demand amid ample low-cost funding.
Broad Product Suite: Beyond HELOCs, Upstart’s growth in unsecured personal loans, micro loans, auto loans, and small business loans further diversifies its revenue streams. The company’s prime lending program, which is already deployed by 30 banks and credit unions, taps into the super prime borrower segment, driving quality loan origination and reducing the company’s delinquency rate by 22% year-over-year.
Massive Addressable Market
Tremendous Market Opportunity: Upstart’s total addressable market exceeds $3 trillion in annual loan originations, with specific segments including:
Home loans: $1.4 trillion opportunity
Auto loans: $677 billion opportunity
Personal loans: $155 billion opportunity
Small business loans: $895 billion opportunity
This vast market potential positions Upstart to capture significant market share as traditional lending paradigms evolve.
Catalysts for Multiple Expansion
Artificial Intelligence Leadership: Upstart’s continuous model improvements will drive further efficiency, lower default rates, and enhance borrower selection, reinforcing its leadership position.
Scalable, Automated Processes: With 91% of loans fully automated, the scalability of its platform remains unmatched, positioning Upstart to capture increasing volumes without a commensurate rise in operational costs.
Product Diversification: The expansion into HELOCs and other diversified lending products provides multiple revenue streams that mitigate risk and offer compelling growth prospects.
Partnership Growth: With 28 new banks and credit unions onboarded in 2024 and more than 50% of funding secured through committed capital and co-investment partnerships, Upstart is well-capitalized to fuel future growth.
Market Sentiment and Financial Upside: Given the robust performance metrics and the enormous underlying market, we believe the market has yet to fully price in the growth potential. A move to 26 times sales is justified by the company’s impressive fundamentals and expansion capabilities.
Risks and Mitigants
Economic Cycles: While lending is inherently cyclical, Upstart’s advanced credit models and diversified loan portfolio help mitigate risks associated with economic downturns.
Regulatory Environment: Upstart operates in a highly regulated industry. However, its strong compliance record and proactive approach to regulatory changes serve as robust mitigants.
Competitive Landscape: The competitive environment in fintech is intense, yet Upstart’s superior technology and proven track record give it a distinct competitive advantage.
Conclusion
Upstart represents a paradigm shift in the lending industry, driven by state-of-the-art AI technology, operational automation, and a deep commitment to financial inclusion. The company’s impressive growth trajectory, diversified product portfolio, and substantial addressable market provide a compelling case for sustained expansion. With our conservative estimate of revenue growth and multiple expansion to 26 times sales, Thomas Third Capital confidently sets a 12-month price target of $291 per share. This reflects our conviction that Upstart is not merely a fintech company—it is a revolutionary force poised to redefine credit underwriting and lending for the modern era.
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Disclaimer: I/We have a long position in Upstart. Please do your own research and seek financial guidance from a licensed financial advisor or a tax attorney if necessary.
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