The fourth quarter of 2023 was another disappointing quarter for Upstart (UPST -2.70%). The company reported revenue of $140 million, which was down 4% year over year. What’s more worrying is the net loss, which totaled $42.4 million in the three-month period that ended Dec. 31.

The shares are getting crushed, down 25% since the report. However, some risk-seeking investors might still have high hopes when it comes to the struggling business and its long-term prospects.

Can this fintech stock, which is currently 93% off its peak price, make investors into millionaires?

Heightened uncertainty

With the artificial intelligence (AI) boom in full swing, it’s encouraging to know that Upstart has long been working on this revolutionary technology in its own business. The company leverages the power of AI and machine learning to train its models to better analyze consumers’ risk profiles when they apply for loans. By looking at 1,600 different variables, Upstart has developed a system that can gain a more complete understanding of an individual’s ability to repay.

Management touts the accuracy of its AI-powered lending platform, with its data showing that it can increase the number of loans its 100-plus lending partners can approve and reduce default rates considerably. This is a winning solution for every stakeholder.

On an annualized basis, the total amount of loans for personal, auto, small business, and homes originated in the U.S. totals over $3 trillion. Having handled just $36 billion of loan originations in its history as a business, Upstart has a very small share of what executives believe is its total addressable market.

A breakthrough tech-focused product, coupled with a large industry opportunity, seems like the perfect recipe for monster returns for shareholders. It’s not that simple, though.

At the end of the day, Upstart depends on strong demand from borrowers for loans, as well as the willingness and ability for financial institutions to lend. When monetary policy is loose and interest rates are kept low, which is what the U.S. has seen for most of the past 15 years and during the depths of the pandemic, Upstart performs extremely well.

However, tighter economic conditions have revealed the company’s true colors. This is a very cyclical enterprise. Upstart’s revenue declined 1% in 2022 and 39% in 2023. And during those eight quarters, the business reported a cumulative net loss of $349 million.

Investors should want to own financially sound companies that are growing at a healthy rate, while at the same time producing consistent positive net income. Because of its macro sensitivity, Upstart isn’t close to fitting this description. That adds extreme uncertainty over the long term.

Important variables to know about

From their initial public offering in December 2020 to their all-time high in October 2021, Upstart shares climbed more than 1,200%. The company’s market cap exceeded $30 billion, far above the current $2.3 billion valuation. Of course, this was during a raging bull market that lifted many growth tech stocks to new heights.

Bullish investors are hoping Upstart can get back to this level one day. If everything goes right with the business over the long term, then investors could end up winning big. But I believe there’s just too much uncertainty as we look ahead.

Despite the huge potential, based on the facts as they appear today, I don’t think Upstart makes for a smart investment. So I view the chances of it being a millionaire maker as very slim.

Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy.

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