Upstart Holdings Inc. released its outlook for the current quarter, sending shares of the lender tumbling 18% in after-hours action Tuesday.
Looking at the first quarter, Upstart UPST,
expects revenue of approximately $125 million. Analysts had expected $152.3 million.
The company, which uses artificial intelligence to make lending decisions, also models a $25 million loss based on earnings before interest, taxes, depreciation and amortization. The FactSet consensus called for about $5 million in adjusted Ebitda.
Chief Financial Officer Sanjay Datta said on the earnings call that Upstart is “becoming more conservative in our underwriting of higher FICO borrowers,” meaning those with higher credit scores.
The weak outlook “and management’s observation of weaker credit performance among major borrowers will likely further delay the company’s turnaround story,” Barclays analyst Ramsey El-Assal wrote in a note to clients.
Upstart shares have doubled over 12 months, but are down about 90% from an all-time high of $390 set in October 2021.
Piper Sandler’s Arvind Ramnani saw some positives in the latest results, including that Upstart has nearly 90% of its unsecured loans fully automated and has seen approval rates for its small-value loans triple.
“While these benefits are masked in the current environment, we believe these enhancements will enhance Upstart’s competitive differentiation in a healthier macro environment,” he wrote.
At the same time, he noted that Upstart operates in “a persistently uncertain and challenging environment.”
The company reported a fourth-quarter net loss of $42.4 million, or 50 cents per share, compared with $55.3 million, or 67 cents per share, in the year-earlier quarter.
On an adjusted basis, Upstart lost 11 cents per share, matching the consensus view based on analysts tracked by FactSet.
Upstart’s revenue fell to $140.3 million from $146.9 million a year earlier, while the FactSet consensus was $134.8 million.
CEO Dave Girouard called the company’s latest results “solid,” although he was also blunt in talking about the year just ended.
“Without a doubt, 2023 was a challenging year for both Upstart and the lending industry, and we’re pleased to have wrapped it up,” he said on the earnings call.