Why Upstart Holdings Stock Got Mashed on Monday

What happened

Upstart Holdings (UPST -4.83%) fell and couldn’t get up on the first trading day of the week. The next-generation loan evaluation specialist’s shares slipped despite a price target boost from a prominent bank. 

So what

That bank is veteran U.K. lender Barclays (BCS -0.58%), whose analyst Ramsey El-Assal lifted his price target on Upstart by nearly 50%, from the previous $25 per share to $37. However, El-Assal is maintaining his rather lukewarm equalweight (i.e., neutral) recommendation on the stock.

The reasons behind El-Assal’s move weren’t immediately apparent. What was obvious, however, is that this is going somewhat against the grain. In the wake of Upstart’s discouraging second quarter, in which the fintech not only missed on the top and bottom lines but also disappointed on guidance, most analysts making post-earnings adjustments cut their price targets.

One, Simon Clinch of Atlantic Equities, went as far as to downgrade his recommendation on the stock too. Clinch now feels that Upstart is an underweight (read: sell); previously he had a neutral tag on the shares. Similar to Barclays’ El-Assal he made a big adjustment to his price target, but in this instance it was in the other direction — to $10 per share from the preceding $22.

In addition to the macroeconomic headwinds buffeting Upstart and other fintechs, the Atlantic Equities prognosticator is concerned with the company’s recent decision “to renege on its promise not to use its balance sheet to bridge future funding gaps.”

Now what

Since Upstart is smack dab in the middle of one of the currently more unpopular stock market sectors (fintech), investors are sensitive to any negative development in the still-young company. Those quarterly results are obviously still leaving a bad taste in the mouths of many market players, and it looks like it’ll take more than an analyst’s price target bump to make them sweet again.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart Holdings, Inc. The Motley Fool recommends Barclays. The Motley Fool has a disclosure policy.

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