So, Upstart. Another one of these "AI-driven" companies that promises to revolutionize everything, right? They're in the lending business, supposedly using AI to make smarter loan decisions. Q3 results are out, and the stock's doing that classic tech stock dance: a little jig up, then a faceplant down 6% in after-hours trading. The headline? Mixed. Of course.
The Numbers Game: Smoke and Mirrors?
Let's be real: "mixed" is code for "we tried to spin it, but even we know it's not great." They beat EPS estimates – $0.52 versus $0.43 expected. Okay, cool. But then they missed on revenue, $277.1 million versus the $285.22 million expected. Upstart stock slides after soft Q4 guidance, mixed Q3 results as loan originations climb (UPST:NASDAQ) Loan originations did climb 80% year-over-year, but so what? You can pump out a ton of loans, but if they're all going to default... well, you see where I'm going with this.
And don't even get me started on the guidance. Q4 revenue expected at $288 million, lower than the $303.61 million analysts were expecting. Fiscal year outlook also got a haircut. Suddenly, the "rapid growth" narrative starts to feel a little shaky, doesn't it?
CEO Dave Girouard spouts the usual corporate BS about executing on their "2025 game plan of rapid growth, profitability, and AI leadership." He claims their AI platform is "performing exactly as designed." Yeah, right. If it's performing as designed, then maybe the design is flawed. Maybe AI can't actually predict who's going to pay back a loan and who's going to stiff you.
I mean, think about it. They're selling this AI as some kind of magic crystal ball. But AI is only as good as the data it's trained on. And if that data is biased, incomplete, or just plain wrong, then the AI is going to be biased, incomplete, and wrong too. It's garbage in, garbage out.
Cash Flow Catastrophe
Here's the real kicker: operating cash flow went negative at -$256.28M. Free cash flow? -$270.58M. That's a yikes from me, dawg. They're burning through cash like a forest fire.
They've got $2.16B in total liabilities against $489.78M in cash. Sounds like a recipe for… trouble.
They're patting themselves on the back because over 90% of loans are "fully automated." Great! So, they've automated the process of potentially making bad loans faster than ever before. That's progress, I guess?
I'm just saying, something doesn't smell right here. They can talk about "AI leadership" all they want, but at the end of the day, they're a lending company. And if they can't manage their cash flow and make smart lending decisions, then all the AI in the world isn't going to save them.
What's the Endgame?
Management will probably try to smooth things over on the earnings call. They'll explain away the negative cash flow, reassure investors that everything is fine, and probably throw in some buzzwords about "synergy" and "disruption" for good measure.
But are people really buying this? Are investors really going to keep throwing money at a company that's bleeding cash and missing revenue estimates? Maybe. The market's irrational sometimes. Look at Tesla stock, for crying out loud.
But still... This feels like another overhyped tech stock destined to crash and burn. Maybe I'm wrong. Maybe Upstart will pull a rabbit out of their hat and become the next Amazon or Nvidia (nvda stock). But I wouldn't bet my house on it.
Fool Me Once...
Look, I'm not saying Upstart is a scam. But I am saying that investors need to be careful. Don't get caught up in the hype. Do your own research. And don't believe everything you hear from CEOs and analysts. Especially when they're trying to sell you on the magic of AI.
So, What's the Real Story?
This ain't the future of finance, it's just another slightly smarter way to gamble with debt.