Upstart Holdings Inc. (NASDAQ:UPST) shares Wednesday surged nearly 20% after Citi analyst Peter Christiansen upgraded the stock from neutral to buy. Christiansen cited the AI lending platform’s recent earnings beat and solid full-year 2021 guidance for his upgrade.
The analyst also raised his price target on Upstart shares from $120.00 per share to $205.00, implying an upside potential of more than 50% from Tuesday’s closing price. Wednesday’s upgrade follows Goldman Sachs’ July upgrade when the investment bank also cited AI-related benefits.
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Upstart reported its fiscal Q2 results on Tuesday after markets closed, beating non-GAAP earnings expectations of $0.25 per share with $0.62. In addition, its GAAP EPS of $0.39 also outperformed expectations by $0.37, while the revenue of $193.95 million was higher by $36.2 million.
Should you buy Upstart shares in August 2021?
From a valuation perspective, the Upstart stock trades at a steep P/E ratio of 938.63. In addition, its forward P/E of about 119.33 also indicates potential overvaluation. However, analysts expect the company to post an EPS growth of nearly 170% this year before increasing by 83% next year.
Therefore, despite the steep UPST valuation on a price-earnings basis, the company’s future earnings growth could make the stock attractive to growth investors. Thus, with analysts still having a buy rating on Upstart shares, it could be the time to buy ahead of its exciting growth story.
Technical overview: Upstart Holdings stock price forecast for Q3 2021
Technically, Upstart shares seem to have recently spiked to overbought conditions in the 14-day RSI. However, the stock still enjoys solid support from the 100-day moving average in the intraday chart.
Therefore, Wednesday’s spike could be the beginning of a significant rally as more analysts continue to issue buy recommendations on UPST shares.
As such, investors can target extended rebound profits at approximately $178.31 or higher at $192.49, while the support levels can be found at $146.00 and $127.88.
Bottom line: the case for buying Upstart shares now
In summary, although Upstart shares trade at steep P/E ratios, its earnings growth expectations make it a compelling option for growth investors. Furthermore, despite spiking nearly 20% on Wednesday’s the rebound seems to enjoy solid support from the 100-day moving average.
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