For those who are into fintech, I am sure you are all aware a company called Upstart ($UPST). You might also know that the stock is up 110% within the last month. And given that this was once a $390 per share, we have been getting lots messages asking if it’s too late to get in or it’s over-bought.
Here is our thought in one slide. Too much debt! This is the all time high and $2.9T more than pre-pandemic level. And higher interest coming.
Also, consumer debt default is rising as well. Even Bank of America ($BAC) provisioned $931 million for credit losses in the quarter, much higher than the $30 million a year prior, but below fourth quarter $1.1 billion provision. Total net charge-offs with credit reached $807 million, increasing from the former quarter but still below pre-pandemic levels, the bank said in its earnings release. So while the stock might be doing well, the macroeconomic condition might not be as rosy.
So I won’t be able say one way or another whether $UPST will continue to do well. But in our opinion, I think there are other fintech stocks that might be worth looking: ones that don’t rely too much on loans (even if they are not the one lending, which is $UPST model like any lead generation business).
- $SOFI: a bit more diversified and safer
- $NU: Nubank is Latin America-based similar to $SOFI with so much growth potential
- $AFRM: I think we believe “buy now, pay later” will be the norm going forward
This is just our thinking so do your DD before making any investment decisions