Why Upstart Plunged in February

Published: Friday, March 6, 2026 at 2:05 pm

Upstart's Stock Plunges in February Amidst Margin Concerns and CEO Transition

Shares of fintech company Upstart experienced a significant downturn in February, plummeting 30.6% according to data from S&P Global Market Intelligence. The decline followed the release of the company's fourth-quarter earnings report, which initially presented a positive outlook. However, the market's reaction quickly soured, leading to the substantial sell-off.

Upstart's fourth-quarter performance included a 35.2% revenue increase, reaching $296.1 million, and earnings per share of $0.17, a notable improvement from a loss in the same period last year. The company also provided optimistic forward guidance, projecting $1.4 billion in revenue for 2026, exceeding analyst expectations.

Despite these positive figures, several factors contributed to the stock's decline. One was the announcement of a CEO transition, with co-founder Paul Gu taking over from co-founder Dave Girouard, who will become Chairman. While CEO changes can sometimes trigger investor uncertainty, this transition is seen as a smooth handover.

A more significant concern appears to be the potential for declining profit margins. Upstart, which utilizes AI to originate loans, relies on external buyers to purchase these loans. While loan buyers have returned after the regional banking crisis of 2023, the company's "take rate" on each loan appears to be decreasing. Although revenue increased by 35% in the fourth quarter, loan originations grew by 52%, indicating lower revenue per loan sold compared to the previous year. Furthermore, management projected adjusted EBITDA margins of 21% for 2026, a one percentage point decline from the fourth quarter.

Investors seem concerned that Upstart's reliance on institutional buyers is depressing take rates and margins in exchange for volume. While strong loan sales could offset this, the company's recent shift from losses to profits makes it difficult to assess long-term profitability. The stock's valuation, trading at 63 times trailing earnings and 29.5 times forward earnings estimates, is considered risky, even after the February pullback.

BNN's Perspective:

The market's reaction to Upstart's earnings highlights the delicate balance between growth and profitability. While the company's revenue growth is impressive, the potential for declining margins raises valid concerns. Investors will likely be watching closely to see if Upstart can maintain its growth trajectory while also improving its profitability. The CEO transition, while seemingly smooth, adds an element of uncertainty that investors will be monitoring.

Keywords: Upstart, UPST, Fintech, Earnings, Revenue, CEO Transition, Margins, Loan Originations, Stock, Investment, Financial Performance, Profitability, Wall Street, Analyst Expectations

Full Story