Upstart stock surges as company crushes earnings expectations, announces buyback program

Shares of Upstart Holdings Inc. surged in after-hours trading Tuesday after the financial-technology company easily topped expectations with its latest earnings and outlook while announcing a new share-repurchase program.

which uses artificial intelligence to inform lending decisions, generated fourth-quarter revenue of $304.8 million, up from $86.7 million a year earlier, and ahead of the FactSet consensus, which called for $262.9 million. The total included $287 million in fee revenue.

Barclays analyst Ramsey El-Assal wrote that Upstart’s revenue beat “was driven entirely by revenue from fees.” That stood in contrast to Upstart’s prior earnings report, in which non-core revenue items helped drive much of the upside.

Shares rose nearly 23% in after-hours trading Tuesday.

Upstart further announced that it planned a share-repurchase program of up to $400 million.

“With the volatility in the trading of our stock, we have seen what we believe to be attractive buying conditions at various times over the past year, and our profitability puts us in a position to be able to initiate this program and take advantage of those situations on behalf of our shareholders,” Chief Financial Officer Sanjay Datta said in a release.

Upstart has seen improving profitability as of late, as the company delivered net income of $58.9 million, or 61 cents a share, in its latest quarter, whereas it only had net income of $1 million in the year-prior quarter. Upstart also saw adjusted earnings per share rise to 89 cents from 7 cent a year prior, while analysts tracked by FactSet had been looking for 51 cents a share.

Still, the move appeared to catch some by surprise. Speaking on Upstart’s earnings call, El-Assal commented that it was “unusual” for a company “so solidly in growth mode” to allocate capital towards share repurchases.

“This isn’t a capital-structuring decision, it’s economic opportunism,” Datta replied, noting that there have been “numerous instances over the past year” in which Upstart executives deemed the stock to be undervalued.

El-Assal highlighted in his report to clients that Upstart’s shares have traded in a range of roughly $100 to $400 over the past six months. They closed Tuesday at $109.11.

For the first quarter, Upstart expects $295 million to $305 million in revenue as well as adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) of $56 million to $58 million. Analysts were projecting $258.3 million in revenue for the March quarter as well as $53 million in adjusted Ebitda.

Looking to the full year, Upstart anticipates revenue of $1.4 billion and 17% growth in adjusted Ebitda. The FactSet consensus was for $1.2 billion in revenue.

The company expects about $1.5 billion in auto transaction volume during the full year.

Chief Executive Officer Dave Girouard said in the company’s press release that “auto loan originations on our platform are now ramping quickly and will provide growth opportunities to Upstart for years to come.”

The company “has a unique and proprietary auto refinance product with far less competition than we’ve had in personal lending,” he added on Upstart’s earnings call.

Shares have declined 53.3% over the past three months as the S&P 500

has lost 4.5%.

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