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.
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.
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.
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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