Citing "continued impressive performance," a Barclays' analyst upgraded Upstart Holdings (UPST) - Get Upstart Holdings Inc. Report to overweight from equal weight and boosted his price target on the stock of the artificial-intelligence-based lending platform to $230 from $130.
Shares of the San Mateo, Calif., company were rising 10.4% to $196.56 on Friday.
"UPST’s continued impressive performance leads us to believe that improvements in conversion rate, top-of-funnel acquisition, and margins are more sustainable than we previously thought," analyst Ramsey El-Assal said in a research note.
The analyst added that he sees "additional upside potential from the auto vertical, and a normalization of the credit environment."
"We typically avoid chasing stocks that have repeatedly run past our price targets," El-Assal said, "but in this case we have high conviction that the levers relied upon by UPST to power growth are still very much intact, with further outperformance likely."
The analyst said one of the key drivers of Upstart’s origination volume is the conversion rate, which represents the percentage of customers that finish filling out a complete application, regardless of where it originated; and then goes on to accept a loan offer.
On Wednesday, Upstart Holdings beat Wall Street's second-quarter earnings expectations, prompting analysts to upgrade the stock.
TheStreet's Jim Cramer said in his Real Money column that Upstart Holdings "is one of the premier disruptive names of our time, getting quick loans to deserving people using artificial intelligence to be sure they can pay those loans back."
Tech stock columnist Jon D. Markham, who publishes Strategic Advantage, said "the potential of this business is huge."
El-Assal noted that there are a few items out of the company's control that have helped, including "macro factors have resulted in a lower cost of funds, which has enabled UPST to offer lower rates on loans for potential borrowers (though this is also true of competitors)."
"That said, we believe the majority of UPST’s conversion rate improvement has been driven by improvements to the company’s underwriting technology," the analyst said, "which have helped USPT offer more attractive rates to a wider group of borrowers."