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Why Upstart Holdings Stock Jumped 48% Today

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Why Upstart Holdings Stock Jumped 48% Today

Shares of Upstart Holdings Inc. (NASDAQ: UPST), an artificial intelligence lending platform, surged 48% in extended trading on Wednesday.

What Happened: The surge followed Upstart’s announcement that it has agreed to acquire Prodigy Software, Inc., a provider of cloud-based automotive retail software.

Prodigy’s end-to-end sales software helps bridge the gap between how dealers operate and the new way that people are shopping for cars, according to Upstart. Prodigy has powered more than $2 billion in vehicle sales at franchised dealers from top brands such as Toyota Motor Corporation (NYSE: TM), Honda Motor Co. Ltd. (NYSE: HMC) and Ford Motor Company (NYSE: F).

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Upstart CEO Dave Girouard said Amazon.com Inc. (NASDAQ: AMZN) and Shopify Inc. (NYSE: SHOP) have modernized the online shopping experience but the auto industry "has been left behind."
"Upstart is on a path to reduce the cost of auto financing, and we can accelerate this opportunity with a modern multi-channel purchase experience," Girouard said.

Upstart expects the acquisition of Prodigy will enable to accelerate its efforts to offer AI-enabled auto loans through the thousands of auto dealers nationwide, where the majority of auto loans are originated. The transaction is expected to close in the second quarter of the calendar year 2021.

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Why It Matters: Upstart’s AI lending platform partners with banks to provide affordable credit. Founded by ex-Googlers, the company claims its AI-powered lending model can provide banks with up to 75% fewer defaults at the same approval rate.

According to Upstart, auto retail is among the largest buy-now-pay-later opportunities and the company plans to expand its focus on the auto-financing sector with the acquisition of Prodigy.

Quarterly Results: Upstart also reported its fourth-quarter results on Wednesday, its first financial results as a public company. Net income for the quarter fell to $1.03 million or breakeven per share from $6.05 million or $0.06 per share last year. Adjusted earnings were $0.07 per share, compared to $0.10 per share a year ago. However, revenue jumped 39% year-over-year to $86.7 million.

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Price Action: Upstart shares closed 1.2% higher on Wednesday at $60.79 and further surged 48% in the after-hours session.

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