Trip7

The Nature of the market these days is severely punish growth names that don't continue to guide very high growth. High Growth is the reason many investors paid extremely multiples for some shares and when those growth prospects dwindle so does the stock price.

As far a fundamentals looking at UPST it generated $168m in Operational cashflow but that number is dwarfed by $264m is stock issuance (dilution) and $647m issuance of debt.

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mispoken

Not an UPST sales pitch, just a quick posts with some facts to see a clearer picture

$1.2 Billion in cash (incl restricted cash)
$700 million debt
Their borrowing are warehouse credit facilities (basically like a bridge loan to fund loans they intend to sell) of only $122M and a note of $660M. The note is due in 2026.
For the warehouse facility, the most they can borrow is 85% of loans held for sale. They are at around 20%
right now. Even if they have to pay back the $122 facility right away, no problem. But secondly they are only borrowing 20%. Nowhere near the 85% that they can.

As far as stock issuance, why wouldn’t a company issue stock at or around their former highs? Dilution is always a factor but expected in a new company like UPST. It’s a given; so that doesn’t bother me. UPST is a company that is going up against a fortress of an industry not dissimilar to what RDFN has attempted and failed to do. UPST May fail as well. Time will tell.

Auto loans will start hitting their bottom line end of this year, none of those included in 1st quarter numbers. Still an unproven business for their AI, so standby for that data.

11 lenders that use UPST now have no minimum FICO score, up from 7 last quarter.

The stock price and the actual business tell two different stories. One will be right, one won’t. So far I’m on the losing side of that bet. It could be a smashing hit or out of business in a decade. I’m willing to take the gamble as I’ve sized appropriately for my risk tolerance.

I’ve said it already, but, this is the price of admission for investing in growth. While people continue to repeat the already known (we know, your premonition is now coming to fruition, told ya so etc etc), it’s something that’s already been accounted for in my approach to investing. I’ve been through cycles like this before and I know it could be 5 or more years to get back to where I was just 8 months ago.

For the bears that have been calling the top for the last 5 years, now is their time to bask in the glory. It is what it is and everyone has their day.

As for ARKK…I’m going to take it a step further and say if we see QQQ under 225 they’ll be closed within 6 months. Place your bets!

Another bold statement! I can concede defeat in the first year of the stock challenge…no doubt about that. Numbers will be posted in June. Can Probably assume the second year as well, standby on that. Years 3, 4 and 5 are still up for grabs!

chrisreedrules

What’s the over/under on furloughs in 2023? I’m thinking they’ll be on the table before this is all said and done.

fishforfun

I would be very concerned if I was some of the most recent hired. Good news is we have a lot of retirements coming so that will hopefully help keep the furloughs to a minimum.

Planetrain

UPST as a business model still looks really good to me. Even though interest rates are up (and it punishes growth companies’ valuations), wouldn’t the mid-term demand for its product be higher? In other words, people are being punished by inflation. Things are more expensive. The American way isn’t to cut spending, it’s to get bigger loans! Who better to process this than the AI driven ‘new’ model? I think the biggest obstacle is getting more dealership inventory. When that resolves itself, hopefully UPST takes off.

DeltaboundRedux

A little more than a year ago with Covid a total staff of 7000 was being tossed around.

Now total pilots needed on property in the 14000-16000 range.

Nobody knows. But the bellwether will be when hiring slows, then stops. And not just here.

During the merger announcement in 2008, class size went from 50+ every other week with no end in sight to zero in less than a month. (And it was no small miracle that furloughs didn’t happen as the “synergies” took place).

Breadcream

The US government would just dump another $4,000,000,000,000 into the economy and bail us all out.

Snickers bars would soar to $10.

(I measure inflation using the Snickers metric)

Trip7

The only thing that would cause a furlough is another black swan event and the only thing close to that right now is a Russian ICBM or COVID deadly mutation. Both Black Swans seem unlikely. Stock Market meltdown would hardly dent profits let alone furloughs

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mispoken

I agree, I think the transition back to normal internet rates and normalized inflation (wherever it falls) will probably slow business for AI down. But a year or two down the road, once we’ve achieved “the new normal”, hopefully business resumes.

But make no mistake, it’s a tall order for them! I was hopeful that RDFN (although never invested) would upend the RE market, but so far they’re just treading water. Lending may very well be an impenetrable fortress as well. Big banks have multiple floors of credit analysts doing the work that UPST is (claims to be) and it will be hard to let them go. I was drawn to UPST because, probably like most, I found this quest for the “best” FICO score to be pretty ridiculous. You’re telling me that becuase I close a credit card I opened when I was 18, my score will drop 15%? Meanwhile I make 3,000x what I made when I was 18. Dumb model. UPST *CLAIMS* to have fixed it. But, time will tell!

Breadcream

You’ve just made the error of predicting the next “black swan” event. Thus, by definition, it can’t be a “black swan” event.

You’ve got to go bigger…like the moon exploding or a computer virus that wipes out all of our fiat currency…now I gone and did it, now we can’t call those black swans either.