Upstart Surges Amid AI Lending Revolution, Analysts Eye Strong Upside

Upstart (UPST) has quietly become a standout name in the AI-driven lending space, surprising many investors who might not have pegged it as a major player in artificial intelligence stocks. With a fresh wave of optimism following a blockbuster first-quarter earnings report, the fintech firm is catching Wall Street’s eye, boasting rapid growth in loan originations and an AI-powered platform that’s redefining credit scoring.

Why Upstart’s AI Model Is Turning Heads

Forget the traditional credit scores that have ruled lending for decades. Upstart’s machine learning engine, which runs about one million predictions per loan applicant, is shaking up how creditworthiness is judged. This AI approach not only predicts who’s likely to repay loans but also sets interest rates more precisely, leading to a jump in approval rates and bigger transaction volumes.

In Q1 alone, Upstart’s loan originations skyrocketed by 89% to $2.1 billion, with the total number of transactions more than doubling to 240,706. That’s no small feat. The company also saw its revenue surge 67%, hitting $213 million, while adjusting EBITDA swung from a $20.3 million loss to a $42.6 million profit. These numbers hint that the company may finally be on the cusp of sustained profitability.

It’s worth noting, though, that credit businesses have their risks. A downturn in the economy or a shift in lending partnerships could hit Upstart hard. Still, this quarter’s results, combined with the AI boost, are reason enough for investors to pay closer attention.

Wall Street’s Take: Bulls Are Gathering

Lately, the mood on Wall Street has turned more favorable for Upstart. Among 11 analysts polled by Tipranks in the past three months, four recommend buying the stock, while seven suggest holding it. The average price target of $65.33 signals a potential upside of roughly 39% from current levels. Not bad for a stock that’s been through a wild ride.

The most bullish voices come from Citi’s Peter Christiansen and Mizuho’s Dan Dolev, both setting lofty targets at $83. Kyle Peterson from Needham is also bullish, projecting $70. These analysts highlight Upstart’s expanding private credit manager interest and the strength of its partner network.

Here’s a quick snapshot of some of the key analyst opinions:

• Peter Christiansen (Citi): Buy rating, $83 price target

• Dan Dolev (Mizuho): Buy rating, $83 price target

• Kyle Peterson (Needham): Buy rating, $70 price target

On the flip side, skeptics remain. Goldman Sachs slapped a sell rating on Upstart earlier this year, with a conservative $15 price target. It’s a reminder that risk still looms, especially since about 25% of Upstart’s stock is currently sold short.

Expanding Into Bigger Markets

What makes Upstart’s story compelling beyond AI? The company is diving into massive new markets like auto and home loans. Auto originations jumped fivefold over the past year to $61 million, while home loans grew sixfold to $41 million in the first quarter. Although these segments still represent a small slice of Upstart’s overall business, the potential here is significant.

Auto and home lending are huge markets that could fuel long-term growth for Upstart’s AI lending engine. If the company can scale its tech to handle these sectors effectively, it could unlock substantial new revenue streams.

The Platform’s Efficiency and Scalability

Upstart’s tech is not just smart — it’s efficient. More than 90% of loan applications are fully automated, which means the company can handle a growing volume of loans without a massive increase in costs. This was clear in Q1 when operating expenses only rose 11%, even though fee-based revenue jumped 34%.

The scalability here is key. Upstart’s ability to boost revenue without a proportional rise in expenses suggests growing profitability could be just around the corner.

Table: Upstart Q1 2025 Key Financials

The Road Ahead Looks Promising

With AI at its core, Upstart has built a credit platform that’s attracting more customers and partners. This momentum, coupled with expansion into auto and home loans, paints a picture of a fintech company on the rise. But it’s not without hurdles—credit risks and competition still exist, and investors need to stay alert.

Still, if you ask the bulls on Wall Street, Upstart’s mix of innovative AI tech, improving profitability, and new market opportunities make it a stock worth watching.