1 unstoppable stock that just increased sales by 264%

Artificial intelligence (AI) has the power to transform the way we do business. Along with the obvious benefits of its predictive capabilities, the technology is also able to accomplish complex tasks in a fraction of the time humans would take, and with far less input.

Assets received (NASDAQ: UPST), which uses AI to assess potential borrowers when granting loans to banks, is a prime example. Where the traditional FICO scoring system only analyzes a handful of metrics, Upstart’s AI-powered algorithm looks at over 1,600 data points and still manages to deliver an instant decision 70% of the time.

The stock was one of the best performers last year, gaining 271%, and its 2021 earnings report, released on February 15, provided further proof of why.

Image source: Getty Images.

Unpredictable, in the best possible way

At the start of 2021, Upstart told investors it would generate $500 million in revenue for the full year. In subsequent quarters, it revised that forecast up to $600 million and then to $750 million, before its official 2021 results, released this week, revealed a final figure of $849 million. dollars. He pointed out that even the company itself has trouble predicting how fast it will grow.

But these figures could be surpassed in the future thanks to Upstart’s entry into the car loan business. The company started out offering unsecured personal loans for travel, home improvements and medical expenses, among other things, but last year it made the timely acquisition of software company Prodigy, a developer of sale for car dealerships.

Upstart’s goal was to merge Prodigy’s sales software with its digital lending technology to create a two-in-one platform for car dealerships to offer financing to customers at the point of sale. In October 2021, the company officially unveiled Upstart Auto Retail, which is the finished product. It’s Upstart’s gateway to the $727 billion-a-year auto loan market, seven times the size of the unsecured loan market it relies on.

Fast growing, and just getting started

Upstart’s AI algorithm generated $11.7 billion in loans in 2021, 244% more than the $3.4 billion it made in 2020. Considering the company doesn’t expect to generate just $1.5 billion in auto loans in 2022 suggests its most significant growth opportunity has barely even launched yet.

Upstart measures its success in the automotive segment by tracking dealership rooftops, or simply put, the number of dealerships that have adopted the Upstart Auto Retail platform. In the fourth quarter of 2021, this metric recorded another record high.

Metric

Q4 2020

Q4 2021

Growth

Dealer roofs

111

410

269%

Data source: Upstart.

Upstart’s overall progress is clearly seen in its revenue growth. From 2019 to 2020, revenue grew by 42%, but there was a remarkable acceleration in 2021. Plus, in a rare sight for a tech company that’s still in its growth phase, Upstart is now incredibly profitable.

Metric

2020

2021

Growth

Income

$233 million

$849 million

264%

Earnings per share

$0.23

$2.37

930%

Data source: Upstart.

In 2022, the company expects to generate $1.4 billion in revenue, but given its 2021 result, which blew previous forecasts, there is reason to justify a significant upside from there.

A long-term purchase

For investors who view the 2021 report as one piece of a longer-term puzzle, Upstart has added a hint as to where it might develop next. In his presentation to investors, he added corporate loan origination to his total addressable market estimate for the first time, hinting that he may enter this segment in the near future.

At $644 billion in emissions per year, it’s only a little smaller than the automotive segment, so there could be a significant growth opportunity up for grabs. But eventually, in the very long term, Upstart will likely turn to the mortgage market, a $4.6 trillion-a-year behemoth.

But here and now, Upstart has the backing of some major Wall Street banks. Citigroup, for example, thinks the stock is worth $350 per share, about 140% more than Wednesday’s prices. This should come as no surprise, given the enormous size of the company’s opportunities.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

About Clayton Arredondo

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