Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/upstart-holdings-inc" target="_blank" data-smartkarma-citation="entities:29727:1" rel="noopener">Upstart Holdings Inc (UPST US)</a> has been one of the best performing SaaS stocks in the United States in the past year. Upstart Holdings completed its IPO in December 2020 at an IPO price of $20 per share. Since then, its share price has skyrocketed by 1,252% to reach $270.46 per share. Upstart's market cap has also jumped to $21 billion. Upstart Holdings is also one of the comps to Kakao Pay that the bankers used to price the Kakao Pay IPO. </p><div class="content-highlight">
<p>All in all, Upstart Holdings has experienced extraordinary growth in sales and profits in the past couple of years, driven by its superior AI driven technologies in the personal and auto loans sector. Upstart Holdings is clearly one of the most important companies to pay attention in the global AI-driven lending industry. </p>
<p>As Kakao Pay is trying to complete its IPO next month, it has chosen to include Upstart Holdings as one of the comps. However, we have concerns that investors are likely to put significant discount on the relative valuations of Kakao Pay as compared to Upstart due to the following factors such as increased regulatory scrutiny on the fintech services provided by Kakao Pay and higher marketing and operating costs that are likely to be required to change the way its current financial services are provided.</p>
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Upstart Holdings Inc (UPST US) has been one of the best performing SaaS stocks in the United States in the past year. Upstart Holdings completed its IPO in December 2020 at an IPO price of $20 per share. Since then, its share price has skyrocketed by 1,252% to reach $270.46 per share. Upstart's market cap has also jumped to $21 billion. Upstart Holdings is also one of the comps to Kakao Pay that the bankers used to price the Kakao Pay IPO. 
All in all, Upstart Holdings has experienced extraordinary growth in sales and profits in the past couple of years, driven by its superior AI driven technologies in the personal and auto loans sector. Upstart Holdings is clearly one of the most important companies to pay attention in the global AI-driven lending industry. 
As Kakao Pay is trying to complete its IPO next month, it has chosen to include Upstart Holdings as one of the comps. However, we have concerns that investors are likely to put significant discount on the relative valuations of Kakao Pay as compared to Upstart due to the following factors such as increased regulatory scrutiny on the fintech services provided by Kakao Pay and higher marketing and operating costs that are likely to be required to change the way its current financial services are provided.


Upstart Holdings - Up 1,252% from the IPO Price & A Key Comp for Kakao Pay

Equity Capital Markets

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<div style="text-align: start;">Our base case valuation of Kakao Pay is an implied market cap of 12.1 trillion won or 89,335 won per share.</div>
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<ul>
<li>Our base case valuation is based on 10.7x EV/Sales multiple and applying this to our estimated sales of 954 billion won in 2022.</li>
<li>The EV/S multiple of 10.7x is based on the median valuation multiple of the comps in 2022.</li>
</ul>
<p>The IPO price range is from 63,000 won to 96,000 won. If the IPO is priced near the high end of the IPO price range, we would avoid this deal. <span>On the other hand, if the IPO is priced close to the low end of the IPO price range, we would be more comfortable with taking the deal.</span></p>
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Our base case valuation of Kakao Pay is an implied market cap of 12.1 trillion won or 89,335 won per share.


Our base case valuation is based on 10.7x EV/Sales multiple and applying this to our estimated sales of 954 billion won in 2022.
The EV/S multiple of 10.7x is based on the median valuation multiple of the comps in 2022.

The IPO price range is from 63,000 won to 96,000 won. If the IPO is priced near the high end of the IPO price range, we would avoid this deal. On the other hand, if the IPO is priced close to the low end of the IPO price range, we would be more comfortable with taking the deal.


Equity Analyst, Investi Analyst

Investi Analyst

Equity Analyst

Investment Entrepreneur / Equity Analyst.

<ul><li>Upstart is an emerging leader using Artificial Intelligence to transform the over $110B Consumer Lending Market.</li><li>The company is expecting Revenue Growth of over 100% in 2021 making them a great reopening candidate.</li><li>This article aims to provide a few competitive advantages, analyze the earnings report that led to stock returns of 100% in one week and evaluate future growth opportunities.</li></ul>

Upstart is an emerging leader using Artificial Intelligence to transform the over $110B Consumer Lending Market.The company is expecting Revenue Growth of over 100% in 2021 making them a great reopening candidate.This article aims to provide a few competitive advantages, analyze the earnings report that led to stock returns of 100% in one week and evaluate future growth opportunities.

Upstart Holdings: Competitive Advantages And Future Expectations

Upstart Holdings  / Equity Capital Markets

<p>Our base case valuation of Upstart Holdings is EV of $3,153 million, implied market cap of $3,236 million, and implied price of $35.8 per share, which would be 63% higher than the high end of the IPO price range of $22. Given the attractive upside, we have a positive view of the Upstart IPO. Our base case valuation uses our estimated sales of $321 million in 2021 and a 9.8x EV/S multiple. The 9.8x EV/S multiple was derived from the average of the comps' 2021 EV/Sales average and median multiples. </p><p>Upstart's core business uses the cloud-based artificial intelligence lending platform and aims to provide lower interest rates, higher approval rates, and a smoother digital experience. Since the company's inception, its bank partners have originated more than 0.62 million personal loans that have generated over 9 million repayments. As of the end of September 2020, about 70% of the Upstart-powered loans were entirely automated. </p>

Our base case valuation of Upstart Holdings is EV of $3,153 million, implied market cap of $3,236 million, and implied price of $35.8 per share, which would be 63% higher than the high end of the IPO price range of $22. Given the attractive upside, we have a positive view of the Upstart IPO. Our base case valuation uses our estimated sales of $321 million in 2021 and a 9.8x EV/S multiple. The 9.8x EV/S multiple was derived from the average of the comps' 2021 EV/Sales average and median multiples. Upstart's core business uses the cloud-based artificial intelligence lending platform and aims to provide lower interest rates, higher approval rates, and a smoother digital experience. Since the company's inception, its bank partners have originated more than 0.62 million personal loans that have generated over 9 million repayments. As of the end of September 2020, about 70% of the Upstart-powered loans were entirely automated. 

<p>Upstart Holdings is getting ready to complete its IPO in the US stock market in the next several weeks. Upstart Holdings provides artificial intelligence, cloud-based lending platform. Upstart Holdings is led by several ex-Google employees including its CEO Dave Girouard. It put an IPO placeholder of $100 million but this is likely to be raised further. Goldman Sachs, BofA Securities, Citi, Jefferies, and Barclays are the joint bookrunners on the deal.</p>
<p>The company uses the cloud-based artificial intelligence lending platform and aims to provide lower interest rates, higher approval rates, and a smoother digital experience. Since the company's inception, its bank partners have originated more than 0.62 million personal loans that have generated over 9 million repayments. As of the end of September 2020, about 70% of the Upstart-powered loans were entirely automated. </p>
<p>Upstart Holdings generated revenue of $164.2 million (up 65.3% YoY) in 2019 and $146.7 million (up 44.4% YoY) in 1Q-3Q2020. From 2017 to 2019, the company's sales increased by 69.3% CAGR. The company's operating margins have steadily improved in the past few years from -13.2% in 2017, -8.0% in 2018, and -2.8% in 2019. The company's operating margins turned positive to 0.9% in 1Q-3Q 2020. </p>

Upstart Holdings is getting ready to complete its IPO in the US stock market in the next several weeks. Upstart Holdings provides artificial intelligence, cloud-based lending platform. Upstart Holdings is led by several ex-Google employees including its CEO Dave Girouard. It put an IPO placeholder of $100 million but this is likely to be raised further. Goldman Sachs, BofA Securities, Citi, Jefferies, and Barclays are the joint bookrunners on the deal.
The company uses the cloud-based artificial intelligence lending platform and aims to provide lower interest rates, higher approval rates, and a smoother digital experience. Since the company's inception, its bank partners have originated more than 0.62 million personal loans that have generated over 9 million repayments. As of the end of September 2020, about 70% of the Upstart-powered loans were entirely automated. 
Upstart Holdings generated revenue of $164.2 million (up 65.3% YoY) in 2019 and $146.7 million (up 44.4% YoY) in 1Q-3Q2020. From 2017 to 2019, the company's sales increased by 69.3% CAGR. The company's operating margins have steadily improved in the past few years from -13.2% in 2017, -8.0% in 2018, and -2.8% in 2019. The company's operating margins turned positive to 0.9% in 1Q-3Q 2020. 

United States

Upstart Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides cloud-based artificial intelligence (AI) lending platform to improve access of credit while reducing the risk and costs of lending for bank partners.

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Upstart Holdings (UPST US)

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