Reached (NASDAQ:UPST) has fallen in recent weeks. Meanwhile, as UPST stock fell, the macroeconomic picture for growth stocks improved.
Over time, I have also become even more optimistic about the long-term growth prospects of this business. Therefore, I recommend long term investors to buy Upstart shares at current levels. Today, the stock is trading around $ 150.
Here’s what you need to know about UPST stocks going forward.
UPST action: an improving macroeconomic environment
Since my previous article on Upstart was published on November 26, UPST stock has fallen by around 28%. The forward price-to-earnings (P / E) ratio is now 77, according to In search of the alpha. That’s down from a P / E of 84. Given Upstart’s status as a fast-growing and possibly disruptive tech company, it’s not a very high P / E.
At the same time, there are signs that the macroeconomic environment is also improving. This is largely because the omicron variant of Covid-19 appears to be much smoother than delta. Additionally, it appears the government is also starting to prioritize things like the economy over strict pandemic protocols. The Centers for Disease Control and Prevention (CDC), for example, recently reduces the quarantine period for workers.
Decision suggests government is approaching Covid in a new way, even reflecting recommendations made by some scientists More than a year ago. The strategy? To “enable those at minimal risk of dying to live their normal lives to develop immunity to the virus through natural infection, while better protecting those who are most at risk.”
In my opinion, this new approach can in turn help lower inflation, saving the Federal Reserve from having to quickly raise interest rates. As a result, growth names like UPST stock are likely to rebound in 2022.
Better long-term business prospects
In addition to improving the macroeconomic environment, a few factors have made me more optimistic about the long-term outlook for this company. First, the company – which entered the auto loan market in October – is expected to benefit from the alleviation of the chip shortage and other supply chain issues in the industry. Recently, Qualcomm (NASDAQ:QCOM) CEO Cristiano Amon said the crisis is become less intense. This trend is expected to continue in 2022.
Second, a In search of the alpha article recently reported that Upstart should soon Enter the mortgage market. According to Statistical, the main US mortgage market was worth approximately $ 16.6 trillion in 2020. Obviously, if Upstart could generate even 0.25% or 0.5% of revenue in this industry, its bottom line and UPST’s stock would increase dramatically.
Finally, Upstart said it is also looking to enter the US consumer and small business microcredit market. In the United States, microcredit is an âunderservedâ area where banks are often afraid to venture. In fact, in a blog post from May 2021, credit bureau Experiential wrote the following:
âBanks are generally reluctant to give very small loans, and last year the average SBA [small business administration] loan was $ 272,000. Microcredit is a financing solution designed to fill this gap by providing small loans to business owners who cannot obtain financing from traditional sources.
I think Upstart – with its advanced AI-based technology – will likely be much better at predicting defaults on micro-loans than the more widely used and older technologies. All in all, it could generate a lot of income and profit in this area.
The result on UPST Stock
Without a doubt, microloans could be a great avenue for Upstart as the business grows. However, as I noted above, that’s not the only thing this company has going for it.
Considering the recent sharp drop in UPST stock, improving macroeconomic conditions, and great potential for its new products, stocks here are definitely a buy for growth investors. Consider buying this name while you can.
At the date of publication, Larry Ramer did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publication guidelines.
Larry Ramer has researched and written articles on US equities for 13 years. He was employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing articles for InvestorPlace in 2015. Some of his highly successful contrarian picks include GE, Solar Stocks, and Snap. You can reach him on StockTwits at @larryramer.