Upstart Stock Takes a Hit Despite Strong Q3 Results
Upstart Holdings Inc. (UPST) shares are taking a dip on Tuesday, despite the company reporting strong third-quarter earnings last week. The decline comes after Upstart announced a proposed private offering of $425 million in convertible senior notes due 2030.
This move, aimed at raising capital for general corporate purposes including debt repayment, appears to have spooked investors, even though the company exceeded analyst expectations in Q3. Upstart’s lending volume saw robust growth, and they returned to positive adjusted EBITDA, demonstrating a strong financial footing.
In a statement, Upstart CEO Dave Girouard highlighted the company’s return to growth mode, emphasizing that they are seeing positive momentum even without significant macro-economic tailwinds.
The proposed note offering comes with a 13-day option for underwriters to purchase an additional $75 million worth of the notes. These notes can be converted into cash, shares of Upstart common stock, or a combination of both.
Despite the dip in share price, Upstart’s Q3 performance has been well-received by analysts. Several analysts have upgraded their price targets on the stock. Piper Sandler upgraded Upstart to $85, Citigroup raised their target to $87, JPMorgan bumped their target to $45, and Wedbush lifted their price target to $60.
The company also provided guidance for the fourth quarter, anticipating revenue of approximately $180 million and adjusted EBITDA of approximately $5 million.
While the note offering might have caused a short-term drop in the share price, Upstart’s strong financial performance and positive outlook suggest that this might be a temporary setback for the company. Investors will be closely watching how the note offering plays out and how it impacts Upstart’s future growth trajectory.
