What Upstart Stock Drop Means for SoFi

Unlike Sofi (SOFI), Upstart (UPST) is a profitable company. The Q1/2022 report undermined its lower
guidance. Since markets are forward-pricing mechanisms, UPST stock plunged from $77.56 to end last
week at $38.13. It traded as low as $25.43 before Nasdaq’s May 13, 2022 rally.

In Q1, Upstart posted revenue growing by 155.6% Y/Y to $310.14 million. It earned 61 cents a share non-
GAAP. For the second quarter, it forecast revenue of $295 million to $305 million. This is below the $335
million consensus estimate. For FY2022, revenue is $1.25 billion.

Upstart added bad loan liabilities to its balance sheet. It is also facing headwinds in the lending business,
particularly in automotive. In the past, Upstart touted its car business, implying accelerated revenue

Auto lending is slowing. The mortgage market almost halted. Prices are on the rise and supply is severely
constrained. The industry has too many emerging fintech companies in a shrinking market.

Sofi, which is an “everything” fintech, fell in sympathy with the UPST stock drop. Both Upstart and Sofi
rely on technology as an edge over traditional players. Its machine-learning algorithm will maximize
margins. Still, the lending market is a slowdown.

The volatility in UPST and SOFI stock will benefit traders. Investors should avoid this sector until the dust