I Was So Wrong About Upstart: Do Not Ignore The AI Threat

Julian LinInvesting Group LeaderFollow5ShareSavePlay(9min)CommentsSummaryUpstart is downgraded to a sell due to margin stagnation, rising macro uncertainty, and heightened AI-driven competition risks.Despite 35% YoY revenue growth and minor beats on guidance, UPST's margin contraction and limited upside to guidance disappoint versus prior expectations.Management's 3-year guidance of 35% annual revenue growth and 25% EBITDA margins appears optimistic given economic cyclicality and competitive threats.UPST's current valuation (30x forward earnings including SBC) is not compelling; fair value is seen at 4–6x earnings absent clear margin expansion.Looking for a helping hand in the market? Members of Best Of Breed Growth Stocks get exclusive ideas and guidance to navigate any climate. Learn More »Dilok Klaisataporn/iStock via Getty Images AI has sent growth stocks a bout of extreme volatility. Upstart (UPST) has been caught in the crossfire, in spite of continuing to post solid growth rates. But rising macro uncertainty as well as the potentialThis article was written byJulian Lin37.39K FollowersFollowJulian Lin is a financial analyst. He finds undervalued companies with secular growth that appreciate over time. His approach is to look for companies with strong balance sheets and management teams in sectors with long growth runways. Julian is the leader of the investing group Best Of Breed Growth Stocks where he only shares positions in stocks which have a large probability of delivering large alpha relative to the S&P 500. He also combines growth-oriented principles with strict valuation hurdles to add an additional layer to the conventional margin of safety. Features include: exclusive access to Julian's highest conviction picks, full stock research reports, real-time trade alerts, macro market analysis, individual industry reports, a filtered watchlist, and community chat with access to Julian 24/7. Learn more.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.