Is Upstart's AI Lending Comeback the Real Deal?

Upstart Holdings has bounced back from its early 2020s slowdown, as seen by the AI lender's continued strong loan origination growth.

However, margins aren't rising in line with increasing revenue, and there's another potential hurdle to consider.

Pricey at 35 times forward earnings, investors should wait for lower prices or promising updates regarding key risks before buying.

Over the past five years, Upstart Holdings (NASDAQ: UPST) has experienced roller-coaster price action. After initially surging following its public market debut, high interest rates and falling loan demand led to a steep drop in revenue and ballooning losses.

In the years since, however, the artificial intelligence lending technology company's revenue has bounced back. Upstart has also become consistently profitable. However, with shares still down by over 92% from their high-water mark, Upstart has a long way to go before making even a partial recovery. A further rebound for this fintech stock remains possible, but major uncertainties remain.

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On May 5, Upstart released results for the first quarter. As seen in the results, the AI lender's growth stream continues unabated. Transaction volumes were up 77%, with total originations coming in at $3.4 billion, a 61% increase from the prior year's quarter.

Upstart operates like a marketplace. Financial institutions partner with the company, utilizing its AI models and cloud-based application to assist with loan underwriting and risk assessment. The company has yet to enter the mortgage space, but it provides its technology for auto loans, personal loans, and home equity lines of credit.