The Federal Reserve’s decision regarding the rate hike has led the investors to worry about how the agency will raise it in 2023. An artificial intelligence based lending platform, Upstart Holdings Inc. (NASDAQ: UPST), saw reduction in their share value. UPST stock closed losing over 5% in its price. Rate hike may affect the company in 2023 too.
Fed’s Rate Hike Effect
The company primarily originates personal loans and advances them to the institutional investors. Cost of such loans increase is directly proportional to the Federal Reserve rates. The organization provides loans to near-prime borrowers. They may fall under financial crises in case of an economic recession in the country.
The rate hike has affected the trading volume negatively. The company’s business has remained cyclic which indicates towards more downfall in the stocks. Though the Biden Administration’s push to relieve student loans may help the organization to remain positive.
According to The Wall Street Journal and TransUnion data, outstanding personal loans in the USA have reached $178 Billion in 2022 from $46.4 Billion in 2011 with 20.4 Million consumers. The personal loan debt balance reached 26.3% in 2015. The trend remained positive until 2020 when it fell to (7.6%) in 2020, but reversed the following year.
UPST Stock Price Action
Company shares have lost around 90% value since the yearly high of $161 in March 2022. The price surged during mid-May after the organization revealed a positive earnings report. The stock then saw heavy price swings for the next couple of months changing hands at a high of $54.75 in May 2022 and a low of $32.48 in June 2022.
The value started rising by July’s end which turned into a steady downfall after the company’s earnings report in Q2 2022. Regression channel shows the stock falling in the sellers’ zone with price breaking support of $16 in November 2022 but reclaimed the position on the same day.
Share price has remained volatile but fell downwards everytime it retracted. The stock may see a temporary surge considering the price fluctuation since August.
Though the personal loans accounts for around 1% in the entire consumer debt, it plays a significant role for Upstart. Data shows that people borrow personal loans primarily to pay down their debts. According to the LendingTree user data, 57.6% are using them to set off their debts.
Disclaimer
All the views given in the article belong solely to the author and do not involve any investment advice. The reader must conduct his/her own research before making any investment.
Source: https://www.thecoinrepublic.com/2022/12/23/upst-stock-down-by-over-5-will-it-retract-before-2023/