Where Will Upstart Stock Be in 5 Years?

AI-powered lending platform Upstart (NASDAQ:UPST) has been among the most volatile tech stocks of the past two years.

Following a pronounced boom-and-bust cycle, Upstart shares are once again climbing off their recent lows. Can it mount a full recovery? Where will UPST stock be in 5 years?

Is Upstart Stock a Good Investment?

Whether Upstart constitutes a good investment or not depends largely on the price an investor paid for the stock. The record closing price for Upstart was $390, more than 10 times today’s price.

The lowest closing price in the last 52 weeks, by contrast, was just $11.93. Given this extreme level of volatility, Upstart could be either a massive winner or a huge loss producer, depending on an investor’s cost basis.

What can be said, however, is that Upstart is a business that is currently on the rise after an extremely difficult period in its history.

This quarter, the company expects total revenues of $135 million, up from $103 million in Q1. While Q1’s revenue was down 67 percent from the previous year, this rapid rebound is generally reflective of the improving business conditions at Upstart.

The company’s losses are also expected to be substantially lower over the coming 12 months. Estimates suggest a loss of $0.93 per share, compared with $2.54 in the trailing 12-month period. Paired with a rapid increase in revenues, this reduction in losses could continue to send Upstart shares higher.

Upstart also recently obtained a new line of $2 billion in funding for its loans from its lending partners. This funding raised investor confidence considerably, as it shows that the companies buying loans initiated on Upstart are still firmly behind the platform.

Is Upstart a Risky Investment?

Although Upstart has a basically solid investment thesis, it should be noted that the stock is a risky play.

One of the primary concerns for Upstart investors is the fact that the company is still sharply unprofitable. Upstart’s net margin over the last 12 months has been -42.6 percent. Even with losses expected to drop considerably this year, Upstart will have to demonstrate a path to profitability to investors in order to keep its current rally afloat.

One need only look at short-term analyst forecasts to understand just how fraught with danger Upstart could be. The 12-month median target price for the stock is $13, implying a drop of over 65 percent is on the cards from the most recent share price.

Even though the company is expected to pare its losses significantly this year, the stock’s current price does not seem to be fully justified by its fundamentals.

Another consideration for investors is the fact that Upstart has jumped quickly amid general enthusiasm for AI technology. While there is a great deal of debate about whether this enthusiasm has produced a true bubble, the sudden surge in AI stocks could make for an equally dramatic correction later on. In that event, it seems unlikely that Upstart would emerge unscathed.

What Is the Long-term Forecast for Upstart Stock?

Despite the company’s current challenges and risks, analysts are broadly bullish about Upstart’s long-term performance.

Over the next 3-5 years, the company’s earnings are expected to grow at a compounded rate of just over 100 percent annually. Although this is an extremely optimistic forecast, it reflects the considerable potential that Upstart could have if all goes well for the business.

Based on both present performance and expected future earnings, the long-term case for Upstart remains largely positive. Investors should, however, balance these expectations with the risks discussed above. Especially in the case of a stock as volatile as Upstart, small changes in the macro environment or the performance of the business could cause large shifts in share prices.

What Will Upstart Stock Be Worth in 2025?

While it’s impossible to say if or when Upstart will reach profitability, at least one factor does suggest that stock prices will improve considerably by 2025.

Much of the pressure on Upstart has come from rising interest rates. The potentially good news for the company, though, is that interest rates are expected to peak this year.

By 2025, rates could drop back to around 3.25 percent. While far from the near-zero rate environment that once drove Upstart’s growth, lower rates could produce higher demand for the company’s lending platform.

Another macroeconomic factor that may support considerably higher prices for Upstart by 2025 is the cycle of the stock market itself. Coming off of the longest bear market in decades, the S&P 500 recently moved into bull market territory again. With the average bull market lasting about 2.7 years, the stock market could be well into its next upswing by 2025.

As noted above, Upstart’s earnings growth over the next few years is expected to be massive. This, together with receding interest rates and a generally favorable stock market, creates an excellent environment for much higher share prices by 2025. At least one forecast places Upstart at about $200 by 2025, more than five times the current trading price.

It’s important to note, however, that this is almost certainly a best-case scenario for the stock. Weaker-than-expected macroeconomic factors, lack of profitability or other obstacles could easily throw Upstart off of this rapid growth trajectory.

While the long-term earnings forecast certainly seems to support much higher prices over the next five years, investors should likely assume a more conservative return.

Assuming Upstart reaches profitability and achieves a rapid growth rate fueled by its AI lending platform, a multiple of 2-3x current prices may be a more realistic target for 2025.

Where Will Upstart Stock Be in 5 Years?

Looking forward even further, current projections suggest that Upstart could be trading as high as $275 by 2027.

Once again, investors should note the risks that Upstart carries and the level of optimism behind these projections.

Even if Upstart reaches a more conservative price of $200 by 2028, however, the stock would deliver more than a 5x return in the space of just five years.

Where Will Upstart Stock Be in 2030?

Based on the company’s current performance and expected future growth, however, it seems reasonable that Upstart could still be posting market-beating returns by 2030.

This could be particularly true if current credit card usage patterns hold. American households currently hold a record $930.6 billion in credit card debt, creating the potential for a rise in delinquencies and a trend of worsening consumer credit scores.

In such an environment, Upstart’s AI-powered approval algorithm could become a go-to option for creditworthy consumers with weak FICO scores struggling to get loans through more traditional channels.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.