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Upstart’s Outlook Has Brightened with Long-Term Opportunities

Upstart (NASDAQ:UPST) has tumbled over the last few weeks. Meanwhile, as UPST stock has fallen, the macro picture for growth stocks has improved.

The website for Upstart (UPST) is viewed through a magnifying glass focused on the company's logo.
The website for Upstart (UPST) is viewed through a magnifying glass focused on the company's logo.

Source: Postmodern Studio /

As time has gone on, I’ve also become even more bullish on this company’s longer-term growth outlook. Consequently, I recommend that long-term investors buy shares of Upstart at current levels. Today, the stock trades around the $150 mark.

Here’s what you should know about UPST stock moving forward.

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UPST Stock: An Improving Macro Environment

Ever since my previous article on Upstart was published on Nov. 26, UPST stock has fallen about 28%. The forward price-earnings (P/E) ratio is now 77, according to Seeking Alpha. That’s down from a P/E of 84. Given Upstart’s status as a rapidly growing, likely disruptive tech company, this is not a very high P/E.

Meanwhile, there are signs that the macro environment is also improving. That’s largely because the omicron variant of Covid-19 appears to be much milder than delta. Further, it seems like the government is starting to prioritize things like the economy over strict pandemic protocols now, too. The Centers for Disease Control and Prevention (CDC), for instance, recently lowered the quarantine period for workers.

This decision suggests that the government is approaching Covid in a new way, even mirroring recommendations made by some scientists over a year ago. The strategy? To “allow those who are at minimal risk of death to live their lives normally to build up immunity to the virus through natural infection, while better protecting those who are at highest risk.”

In my view, this new approach can in turn help lower inflation, preventing the Federal Reserve from having to quickly raise interest rates. As a result, growth names like UPST stock will likely rebound in 2022.

A Better Longer-Term Business Outlook

In addition to the improving macro environment, a few factors have made me more upbeat on this company’s longer-term outlook. First, the company — which entered the auto-lending market in October — should benefit from the easing of the chip shortage and other supply-chain issues in that sector. Recently, Qualcomm (NASDAQ:QCOM) CEO Cristiano Amon said the crisis is becoming less intense. That trend should continue in 2022.

Secondly, one Seeking Alpha article recently reported that Upstart should soon enter the mortgage market. According to Statista, the primary U.S. mortgage market was worth about $16.6 trillion in 2020. Obviously, if Upstart could generate even 0.25% or 0.5% of the revenue from that sector, both its financial results and UPST stock would soar tremendously.

Finally, though, Upstart has said it’s also looking to enter the U.S. micro loan market for both consumers and small businesses. In the States, microcredit is an “underserved” area where banks often fear to tread. In fact, in a May 2021 blog, credit-rating bureau Experian wrote the following:

“Banks are typically reluctant to make very small loans, however, and last year the average SBA [small business administration] loan was $272,000. Microlending is a financing solution designed to bridge this gap by providing small loans to business owners who can’t get financing from traditional sources.”

I believe that Upstart — with its advanced AI-based technology — will likely be much better at predicting defaults on micro loans than more widely used, older technologies. All told, it could generate a great deal of revenue and profit in that area.

The Bottom Line on UPST Stock

No doubt, micro loans could be a great avenue for Upstart as the company expands. However as I noted above, that’s not the only thing this company has going for it.

Given the recent sharp decline in UPST stock, along with the improving macro picture and the big potential of its new products, shares here are definitely a buy for growth investors. Consider buying this name while you can.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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