How Upstart Holdings shares can double from current levels

It was an attack on rising stocks, regardless of quality. Upstart Holdings (NASDAQ:UPST) also did not perform well in the sale, as the UPST share fell by 64% compared to the highest value in mid-October.

The shares were actually holding up well given the selling pressure of the rising shares. For example, when Upstart reached its all-time high on Oct. 15 Innovation Fund Ark (NYSEARCA:ARKK) was 27% lower than the all-time high.

This is even with the largest share – Tesla (NASDAQ:TSLA) – lifts higher and only for hair with the highest value of all time. The ARKK is a good approximation for stock growth, as Cathie Wood has invested in dozens of the fastest growing companies over the past few years.

The question now is, can Upstart recover and if so, how far can it go?

Why I like UPST Stock

I like Upstart because it continues to exceed its growth estimates. The company went public in December 2020 and has achieved impressive results in the last year. In each of its four reports as a public company, it exceeded expectations in terms of profit and revenue.

Lastly, Upstart made a profit of 60 cents per share with revenue of $ 228.5 million. That exceeded expectations by 27 cents a share, or $ 13.6 million. The prospects of the administration require a sale from $ 255 to $ 265 million in the fourth quarter, compared to analysts’ expectations of $ 227.6 million.

But the stock market doesn’t care at the moment. Shares decreased by 22.6% on the day after the profit (but closed by 18.2%). Good, bad or ugly, investors sell growth stocks no matter what they report.

However, we have seen that revenue estimates for 2021 have risen from less than $ 250 million at the beginning of the year to more than $ 800 million at present. Estimates of revenue for next year were below $ 500 million at the beginning of the year compared to $ 1.14 billion at present.

In that sense, Upstart reminds me a lot of a stock like that Advanced micro devices (NASDAQ:AMD). This company too saw exploding expectations, even when the shares were not traded in this way.

Overall, analysts expect revenue growth of nearly 250 percent this year. Obviously not sustainable in the long run, these estimates fall to “Only” 46% in 2022 and 26% in 2023.

Remember the essence and evaluation

A typical growth share can be under pressure if it has high value or is not profitable. This is regardless of the revenue growth rate, especially at a time when the whole group is under pressure.

With UPST shares, however, valuation is reasonable (in my eyes) and company is profitable.

The company is expected to earn $ 1.96 per share and $ 2.42 per share next year. Like revenue estimates, they have earnings expectations it has risen considerably in the last 12 months.

While trading in Upstart shares may remain somewhat highly valued on a profit basis as a result, this is to be expected for high-growth stocks. Based on revenue, however, stock trading increased to 10 times revenue in 2022.

It’s not necessarily cheap, but it was not ruled out to see stock trading with 15 to 20 times the revenue a year ago, while it was much lower quality than Upstart.

In addition, Upstart is a positive free cash flow and has been the last four years. While the company recently acquired about $ 600 million in long-term debt, it boasts more than $ 1 billion in cash and cash equivalents.

UPST Stock Trading

Is there any assurance that the UPST share will be $ 160 in support? No, not at all!

This could exceed that level – the lowest value in each of the last two weeks – and put the $ 140 level at stake. There, he finds a gap from August that spurred a big rise to $ 400.

Note that the Upstart also sticks to the 50-week moving average.

However, if the UPST stock finds its foundations in the near future, the bulls will be looking to move back above the 200-day moving average. Above that level and the $ 200 limit, investors could look at 10-week and 21-week moving averages.

Although this seems a modest increase, it would mean about 50-55% growth compared to current levels.

A move above $ 270 and a 50-day moving average puts gaps in the game from November at around $ 308. If the UPST stock rises to this level, it will represent about twice as much as the current levels.

Remember, growth stocks are in the bear market, but there is potential in quality holdings when the dust settles.

Bret Kenwell did not (directly or indirectly) hold any positions in the securities mentioned in this article at the date of publication. The opinions expressed in this article are those of the author and are the subject of InvestorPlace.com Guidelines for publication.

Bret Kenwell is a leader and author Future Blue Chips and is on Twitter @BretKenwell.