Earnings Update: UPST, KRNT, GLBE
Upstart (UPST) reported Q3 results yesterday, and the stock is taking it on the chin this morning despite strong results. The main issue is the stock’s price had already factored in a ton of great news, so the report needed to be amazing to justify the share price. It didn’t hit that super high bar. We already locked in partial profits of 142% and 202% by selling two quarter-sized positions, and even with a big pullback our remaining half stake has crushed the market (up over 160%). But still, with UPST down double digits today and expectations high going into the event there’s no doubt this reaction is a letdown.
On to the results. Revenue was up 250% to $228.5 million (beating by $13.1 million) while adjusted EPS of $0.60 beat by $0.27. Lending volume hit 362,780 loans, up 348%. Upstart now has 31 bank and credit union partners, up from 10 a year ago. Full-year revenue guidance was increased by $50 million to $800 million, a nice jump but far less than the increases of previous quarters.
Big picture, Upstart is still a major disruptor in the financial space. The company is just getting going in auto loans and branching out into other consumer loans, with mortgage loans a long-term initiative management will begin to invest in in 2022. It is also quite profitable. That all said, the quarter shows that the company can’t turn the entire consumer finance industry on its head in a few quarters – it’s going to take time and there will be challenges and competitive threats along the way. Also, the end of the year doesn’t sound like the strongest time for people to be originating new loans. Look for things to pick up early in 2022.
I think UPST will be in the penalty box for a little while, but it would also only take a press release or two on progress in the auto market to juice the stock again. Looking back in the stock’s short history (IPO just under a year ago) pullbacks of -30% to -60% are not uncommon (as crazy as that sounds). I’m not into buying the dip, but not ready to walk away. Let’s sit on our remaining half and see how UPST handles itself in the coming weeks. HOLD
Kornit Digital (KRNT) reported Q3 results that missed on the top line and matched consensus on the bottom line. Net of the $7.9 million impact from warrants, revenue was up 51% to $86.7 million ($89.2 million expected) while adjusted EPS of $0.27 was in line. Guidance for Q4 of revenue in the $89 million to $93 million range was just ahead of consensus of $88.1 million. In the early going the stock has been a little up and down (roughly flat at time of writing). We’ll continue to keep at buy for now. BUY
Global-e Online (GLBE) delivered a beat-and-raise Q3 report yesterday. Revenue rose 77% to $59.1 million (analysts expected $55.7 million) on the back of Gross Merchandise Value (GMV) of $352 million (analysts expected $335 million), up 86%. Service fees were $23 million (consensus $21.1 million), and Fulfillment Services were $36.2 million (consensus $34.5 million). The stock is down today (as are a lot of software and fintech names) but I think the report was good enough for GLBE to hold up moving forward. Adding some noise to trading is the lockup expiration earlier this week. That could drive a spurt of selling in the near term. I want to revisit the earnings call but for now, provided GLBE can stay above 50, keeping at buy. BUY