Price Pullback Makes This 159% AI-Powered Loan Platform A Top Pick

30‑Second Take

Why now? After recent market pullbacks due to profit taking, UPST is trading at an attractive valuation well below its growth potential.

The firm's Q2 earnings confirmed the platform has returned to growth, with the number of loans originated up 159% year-over-year.

This 23.9% Conversion Rate is up from 15.2% in Q2 2024. Total originations exceeded $2.8 billion, up 154% YoY.

As consumer finance continues shifting toward digital solutions, Upstart is perfectly positioned to capture significant market share and drive strong revenue growth.

For investors seeking an under-the-radar alpha stock for less than $75, Upstart offers a compelling opportunity to outperform the broader market with its innovative approach and scalable business model.

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Trade Setup

Time frame: Swing to medium-term
Edge type: Momentum breakout

Snapshot Table

Chart

1-Month Synopsis: The last month has seen UPST endure a period of heightened volatility. The stock initially rose to a high of $84.69 thanks to optimism around AI-driven lending growth and favorable analyst commentary.

A sharp reversal triggered by the company’s Q2 earnings on August 5^th saw prices tumble to $66.50, with further losses in the following days. 

Despite the sell-off, trading volumes remained elevated throughout the period, reflecting sustained speculative interest, particularly from leveraged ETF activity, even as sentiment became more cautious.

Bull Case 

Core thesis: Upstart Holdings is revolutionizing the lending industry with its cutting-edge AI technology, making loan approvals faster, safer, and more accurate than traditional credit scoring methods. 

Unlike legacy credit models, Upstart’s AI-driven platform evaluates a broader range of data points, enabling more accurate risk assessments and expanding credit access to underserved consumers.

This technological edge not only reduces default rates but also enhances lenders’ profitability, making Upstart’s solution highly attractive in a large, fragmented $1.5 trillion consumer loan market. 

As more banks and financial institutions adopt AI-driven lending, Upstart’s scalable platform is poised for exponential growth, supported by recurring revenue streams and expanding partnerships.

Despite short-term volatility, the company’s strong unit economics, innovative product pipeline, and growing market share position it to deliver sustainable alpha, outperforming traditional financial stocks and the broader S&P 500 over the coming years.

Catalysts: UPST stock is up 7.87% on the year but has also beaten analyst expectations for the last three quarters.

It demonstrated a strong Q2 performance with revenues of $257 million, an improvement of 102% YoY.

Revenue from fees was $241 million, up 84% YoY, with a full-year outlook calling for total revenue of approximately $1.055 billion.

The company also reached GAAP profitability a quarter sooner than expected. Upstart’s investment in AI is one of its key growth drivers.

The accuracy of this technology is significant in the current macroeconomic backdrop, where the level of consumer demand for credit is at odds with the more conservative approach to lending that many traditional banks and credit providers have adopted post-pandemic. 

This disconnect means platforms like Upstart are in high demand with an increasing number of would-be borrowers searching for alternatives to their usual banks.

According to data from the Federal Reserve, total consumer credit grew $7.37 billion in June 2025, which was higher than expected.

Significantly, credit card and auto loans are expected to increase further in the coming months – both areas where Upstart offers a fast, seamless, digital solution, which could be much more attractive to borrowers than the usually long-winded process of gaining approval from a traditional lender.

Valuation upside: The highest analyst target for this stock is $108.00, with a low of $20.00. The average price target is $66.20. 

Technical tailwind: The technical MACD indicator, along with the 10, 20, 30, and 50-day moving averages, is flashing buy signals, which is notable with the stock trading at a bargain right now.

Steep losses after its stellar Q2 results suggest a strong performance was already priced in. The short-term profit taking creates a clear window of opportunity for high-risk, high-reward buyers.

Bear Case 

Key risk: As with any loan provider, defaults are a primary concern.

An increase in credit defaults or tighter funding conditions could force the company to hold more loans on its balance sheet, straining liquidity, increasing exposure to credit losses, and undermining investor confidence in its AI-driven lending model.

Given Upstart has been in recovery mode for more than a year, any sharp shift in these metrics could unwind the progress it has already made to return to growth over the last 12 months. 

Macro/sector headwinds: Interest rates, inflation, and geopolitics could all put the brakes on growth, but the most significant headwind is compliance and regulation.

That's because AI powers much of Upstart’s platform (and its explosive growth this year) – but it’s still a grey area for regulators who have already expressed concerns about potential bias and transparency.  

Competitive threat: While UPST has leveraged AI to power its growth, it doesn't have a monopoly on this technology.

Traditional banks and other platforms are also adopting AI-supported decision-making. In the case of banks in particular, their much larger client base and bigger budgets could pose a threat.

Crowded-trade concern: Heavy positioning by momentum-driven funds and retail traders magnifies gains and losses beyond what the fundamentals may suggest.

UPST has already experienced this in 2021 and could see a similar sharp loss if sentiment shifts once again, whether due to a miss on the next earnings report or, as was the case previously, due to interest rate changes.

Quick Checklist 

✅ Thesis still valid after today’s close
✅ Volume confirms move above key levels
✅ Catalyst date double-checked (August 11, 2025)

Deep‑Dive Links

• Q2 2025 Earnings Report 

• Analyst Ratings and Price Targets

• Short Interest Data

• Company Profile and Investor Relations

That’s all for today’s Everyday Alpha. We’ll have a new pick for you every morning before the market opens, so stay tuned!

Best Regards,
—Noah Zelvis
Everyday Alpha