By Sam Boughedda
Shares of Upstart Holdings (NASDAQ:UPST) were cut to Underweight from Neutral at Atlantic Equities on Thursday, with the firm's price target lowered by $10 to $22 per share.
An analyst said in a note that after weak second-quarter earnings, as preannounced, Upstart provided disappointing third-quarter guidance. He stated the company's guidance highlights the ongoing severity of headwinds facing the business in the near term.
"More concerning to us is the fact that management has chosen to renege on its promise not to use its balance sheet to bridge future funding gaps - albeit only as temporary flexibility," wrote the analyst.
"Along with its intentions to reconfigure its institutional funding base to focus more on longer-term supply commitments, at a time when its core institutional and banking partners are increasingly worried about macro conditions and sub-prime lending, we conclude that risks to the business have increased meaningfully in the near-term. Our estimates fall again, with FY22 and FY23 adjusted EPS estimates declining 19.9% and 32.6% respectively. Maintaining our 15x multiple, we lower our target price to $22 and downgrade Upstart to Underweight as we wait to reach a bottoming of fundamentals," he added.
Upstart shares gained over 17% Wednesday but fell slightly on Thursday, down 0.6%. However, in 2022, they have declined by more than 77.8%.