Executive Summary

  1. Upstart (NASDAQ: UPST) is an AI-driven lending platform that partners with banks and credit unions to deliver more affordable, personalized consumer loans. By incorporating machine-learning models and alternative data sources, Upstart’s platform assesses creditworthiness beyond traditional FICO scores, enabling: Faster approval decisions and higher automation (92% of credit decisions are fully automated) / broader access to credit for non-prime borrowers while maintaining risk-adjusted returns / off-balance-sheet financing for partner banks—loans are sold to institutional investors days after origination, freeing up Tier 1 capital under Basel rules.

  2. Unsecured personal loans market is characterized as highly fragmented, intensifying competitions and cyclical in nature. No single player account for greater than 20% of the market and market share fluctuates greatly during market cycle.

  3. UPST’s core segments continue to recover from the rate hikes in 2022 and 2023. Key catalysts include auto/HELOC scale and rates cut with a soft landing. In 2Q 2025, Upstart’s funding ecosystem financed $20.2 billion in loans, with 65% purchased by institutional investors, driving scalable growth without expanding bank balance sheets.

  4. Reality seems to suggest the business moats is unlikely sustainable due to (1) market share volatility, (2) partner concentration persistence and (3) financial performance.

  5. Initial coverage on UPST with a SELL rating and $9.2 price target, representing an 87% drop from the current market price of $68.76. Under my best-case scenario, the intrinsic value is estimated to be $31/share, still significantly below the current market price.