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Goldman Sachs analyst Michael Ng downgraded Upstart (NASDAQ:UPST) shares to Sell from Neutral with a $14 per share price target, down from the prior $40.
Although the analyst notes Upstart’s “impressive” penetration of the U.S. personal loan market, he also acknowledges an “evident” slowdown in origination and revenue growth, which is a result of the “heightened competition and increasing funding costs for UPST partners.”
As a result, the visibility into long-term growth is reduced.
“Slowing growth and reduced confidence in UPST’s differentiation in credit underwriting likely will catalyze a further,” he added.
Goldman Sachs analyst sees revenue generation opportunities for Upstart in the auto loans sector, but admits the momentum so far has been “limited.”
“The US auto lending market represents a meaningfully larger addressable market than personal loans with approximately $770 bn of origination volume in 2021. That said, rising interest rates likely will dampen demand for auto refinance loans and UPST’s originations to-date have been largely immaterial (e.g., 11k auto refi loans in 1Q22, or ~2% of total loan volume by units),” Ng explained.
Upstart shares are down a further 5.3% in pre-open Monday after dropping nearly 20% last week.
Overall, UPST stock is down over 80% YTD.
