Is This Beaten-Down Financial Stock Finally Worth Buying?

There have been major advances in financial technology, or fintech, over the past few years, and many young fintech stocks have become popular with investors.

Take Upstart Holdings (NASDAQ: UPST). The artificial intelligence (AI)-focused credit evaluation platform took the market by storm when it went public, achieving astronomical gains before plunging back to earth. Upstart stock now trades about 91% off its highs, but the business is bouncing back.

Is it finally time to buy?

Image source: The Motley Fool.

Upstart is the AI answer to lending

Let's back up for a moment and see why Upstart was so exciting to investors when it debuted in the market in December 2020. Upstart operates a credit evaluation platform that uses artificial intelligence and machine learning to more accurately assess credit risk than the traditional credit score. It uses many more evaluation traits and runs them through its millions of data points, leading to higher approval rates without adding risk to the lender.

The evaluation method is positive on so many levels: more people get approved, bringing more money into the economy, and lenders put more of their money to work without a corresponding rise in loan default rates. It's a space that's ripe for AI disruption, and Upstart continues to add lending partners to its platform.

What went wrong for Upstart the following year is that interest rates started rising. In that scenario, it's harder to identify good borrowers, since it becomes harder to pay back high-rate loans. There are also fewer people looking to borrow when rates are high, and Upstart's revenue growth plunged as rates stayed elevated.

Today, as rates have come down, there's been improvement. In the 2025 fourth quarter, revenue increased 35% year over year, and transaction volume was up 86%. Net income was a positive $18.6 million, up from a $2.8 million loss the year before.

The company sells its loans to institutional lenders, and it has lined up a large pool of funding, including 11 lenders in the fourth quarter and 13 additional ones for 2026. That way, it doesn't have to keep loans on its books and retain deeper exposure to interest rate fluctuations.

Is Upstart turning around?

Management said that it would no longer provide quarterly guidance and would focus on long-term growth instead. Management expects $1.4 billion in revenue in 2026, a 40% increase, and a compound annual growth rate of 35% through 2028.

Upstart also recently announced that it has applied for a bank charter and plans to be the first U.S. bank built on an AI foundation. That would give it access to deposit funding and the ability to transact directly with borrowers, rather than functioning solely as a platform.

That could be an exciting step for Upstart, but it also means it becomes a full bank with full exposure to interest rate changes. In other words, while it creates opportunity, it deepens the risk with Upstart stock.

I think Upstart could be a huge winner, but there's too much uncertainty for me to say that it's finally worth buying.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy.