Upstart's stock is experiencing a downward trend as the AI-driven lending company predicts a slower growth trajectory. This prediction comes as a surprise to Wall Street, which had anticipated a more robust performance. The company's stock took a hit, dropping by 16% in extended trading following the release of its December-quarter guidance. Upstart's revenue is expected to reach $288 million, a 32% increase from the previous year, but still lower than the $304 billion FactSet consensus estimate. This marks a significant slowdown from the 71% growth rate seen in the September quarter, which generated $277 million in revenue. The stock's decline is further exacerbated by a 25% year-to-date drop. Despite these challenges, Upstart's CEO, Dave Girouard, remains optimistic, attributing the growth slowdown to the company's AI platform's ability to adapt to changing market conditions. He highlighted a sixfold sequential increase in net income and emphasized the vast potential of AI in the credit industry. However, the company's earnings call also revealed a K-shaped economy, where lower-income individuals are struggling while upper-income consumers are thriving. Upstart's underwriting models have shown resilience, but the company is witnessing higher default rates among consumers with credit scores in the 720 to 750 range. This situation suggests a U-shaped economic trend rather than a K-shaped one. The volatility of Upstart's stock is notable, with eight out of the past 10 post-earnings moves being double-digit. This makes it crucial for investors to stay informed and consider the broader economic context when making investment decisions.
