Upstart (UPST -2.07%) is one of the best-performing stocks in the market recently, with shares up by nearly 290% since the middle of 2024. The company has reported several consecutive quarters of better-than-expected results, and lending market conditions have become much more favorable than they were in the past few years.
Despite the stellar performance, Upstart could be a strong opportunity for patient long-term investors. Here are three reasons why it could still be a great time to add Upstart to your portfolio.
1. Excellent growth and improving profitability
As mentioned, Upstart has outperformed expectations for several quarters in a row, and the most recent was the most impressive yet. In the fourth quarter, Upstart’s revenue soared by 56% year over year and even grew by 35% sequentially (compared to the third quarter). Loan volume increased by 68% year over year to $2.1 billion. All of this was much greater than analysts had expected.
It isn’t just top-line revenue growth that is impressive. Upstart’s profitability is heading in the right direction, and fast. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin in the fourth quarter was 18%, and it was 0% a year ago. And while the company isn’t profitable on a generally accepted accounting principles (GAAP) basis, its net loss of $4.8 million was about one-tenth of its reported loss in the fourth quarter of 2023.
Looking ahead, Upstart expects to produce about $1 billion in revenue for 2025, which would be its first billion-dollar year ever. Not only that, but management expects to be “at least breakeven” on a GAAP basis in 2025, which would be the first time there wasn’t a reported net loss since 2021.
2. There’s still a massive growth opportunity
Upstart’s $2.1 billion in loan origination volume was impressive, but it almost entirely consisted of personal loans. And to be fair, this has been Upstart’s bread and butter, and there is still plenty of room to grow in this arena.
However, the company has rolled out auto lending and (more recently) home equity lines of credit (HELOCs). Both have gained impressive traction already, with sequential growth of 61% in auto loans and 59% in HELOCs in the fourth quarter. And both market opportunities are absolutely massive.
Just consider this:
- The auto lending market is estimated at $677 billion in annual volume — more than four times the size of the personal loan industry.
- Homeowners in the United States are sitting on about $35 trillion in home equity, the most in history.
To put it mildly, Upstart could continue to grow both of these loan types rapidly for years to come. And if interest rates trend lower over the next few years, it could provide an additional catalyst.
3. Management is laser-focused on the potential of AI-powered lending
Last, but certainly not least, Upstart’s management team — particularly CEO and co-founder Dave Girouard — are a big part of the investment thesis. Girouard has been in charge since the beginning, and navigated the robust environment of 2020-2021, as well as the extremely challenging slowdown in 2022 and 2023.
Shortly after Upstart reported its latest results, Girouard posted his 2025 top priorities on X (formerly Twitter), and his No. 1 priority is to “10X” Upstart’s advantage in artificial intelligence (AI). Upstart relies heavily on automation and artificial intelligence to underwrite loans, and so far, the results are strong. The company’s loan data shows that its Upstart Risk Grades clearly do a better job of predicting creditworthiness and default risk compared with the FICO Score, and the fact that 91% of Upstart’s loan originations are completely automated is a great driver of efficiency.
Upstart is doing a great job of executing on its strategy, and there’s still plenty of room to grow. As the business scales, margins should get even better, and we could see profitability soar in the years ahead.
Matt Frankel has positions in Upstart and has the following options: short December 2025 $95 calls on Upstart. The Motley Fool has positions in and recommends Upstart. The Motley Fool recommends Fair Isaac. The Motley Fool has a disclosure policy.
