Shares of Upstart (NASDAQ: UPST), an AI-driven lending platform, soared by 17.5% following upgrade from Wedbush Securities, citing improved credit metrics and a favorable macroeconomic environment. The stock, which has seen significant volatility, also hit a new 52-week high. The stock ended the session 15% higher at $54.07. Additionally, Upstart announced a $2 billion partnership with Blue Owl Capital to facilitate consumer loan purchases, boosting its lending capacity. This deal reflects Upstart’s growing market presence and its strategic focus on making lending more efficient through AI technology. The collaboration further solidifies Upstart’s potential for expanded credit access and long-term growth.

Analyst Upgrade Sparks 17.5% Surge in Upstart Shares

Upstart saw its stock jump by 17.5% during morning trading after Wedbush, a major Wall Street research firm, upgraded its rating from "Underweight" to "Neutral" and raised its price target from $10 to $45. The upgrade was driven by multiple factors, including improving credit quality metrics, lower interest rates, and a more favorable Upstart Macro Index. These improvements are expected to positively impact loan originations and adjusted EBITDA in the second half of 2024, reflecting a balanced risk-reward scenario for investors.

This significant increase demonstrates renewed optimism around Upstart’s future, particularly as the lending platform has faced volatile trading patterns over the past year.

Volatility and Market Reactions

Upstart’s stock has been highly volatile, experiencing more than 70 moves greater than 5% in the last 12 months. However, the 17.5% surge following the Wedbush upgrade stands out, suggesting the market is recalibrating its perception of the company’s long-term value.

At its new price of $54.96 per share, Upstart has hit a 52-week high, marking a 41.4% increase year-to-date. This shift could signal the start of sustained upward momentum as investors regain confidence in Upstart’s growth prospects, driven by improving market conditions and financial performance.

Strategic Partnership with Blue Owl Capital

In a significant development, Upstart also announced a $2 billion consumer credit agreement with Blue Owl Capital, a leading alternative asset manager. Under this arrangement, Blue Owl’s Alternative Credit strategy will purchase up to $2 billion in consumer loans from Upstart’s platform over the next 18 months. The initial acquisition of a $290 million personal loan portfolio was completed in September, signaling a strong start to the partnership.

This agreement not only boosts Upstart’s loan origination capacity but also highlights the growing confidence in its AI-driven lending model. Blue Owl’s support will enhance Upstart’s ability to expand access to affordable credit for a wider range of consumers.

Blue Owl’s Long-Term Vision and Expertise

Key leaders at Blue Owl Capital, including Co-Heads of Financial Assets, David Aidi and Ray Chan, have expressed enthusiasm for the partnership, emphasizing their commitment to leveraging data science and deep consumer market expertise. Blue Owl’s involvement is expected to drive greater efficiency in the lending process, benefiting both borrowers and lenders.

Upstart’s CFO, Sanjay Datta, echoed these sentiments, noting that Blue Owl’s long-term vision aligns well with Upstart’s mission to democratize access to affordable credit through advanced AI technology. This partnership marks one of Upstart’s largest purchase commitments to date, signaling strong growth potential ahead.

Atalaya Capital and Apollo’s ATLAS SP Partners Involved in Financing

The transaction was structured by Atalaya Capital Management LP, a well-known alternative credit manager specializing in asset-based credit investments. Atalaya’s expertise in structuring deals across sectors including consumer finance, commercial assets, and real estate added a layer of financial sophistication to the partnership.

Additionally, ATLAS SP Partners, a financing and securitized products business majority-owned by Apollo funds, will provide debt financing for the loan purchases. This collaboration brings together leading players in the alternative credit space, further strengthening Upstart’s ability to execute on its growth strategy and scale its operations.

Outlook: A New Chapter for Upstart’s Growth

With the combined impact of the Wedbush upgrade and the strategic partnership with Blue Owl Capital, Upstart appears poised for sustained growth in the coming quarters. The infusion of capital, alongside improving macroeconomic conditions, positions the company to further disrupt the traditional lending market with its AI-driven platform.

As the partnership unfolds, investors will be watching closely to see if Upstart can continue to leverage its technological edge to expand its share in the consumer credit market, particularly as demand for more accessible and efficient lending solutions grows.