What happened
Shares of the artificial intelligence lender Upstart (UPST 0.96%) traded more than 6% higher as of 2:20 p.m. ET for no obvious reason other than the broader rally among tech stocks today.
So what
The Nasdaq Composite traded nearly 1% higher as of this writing, after spending much of the week selling off. Even after the rally today, the Nasdaq is still down more than 5% this week.
Tech stocks have been getting hammered as investors adjust to the Federal Reserve's new timeline and outlook, in which the agency is now expected to raise interest rates multiple times this year and potentially also shrink its balance sheet. As a fast-growing stock last year, Upstart has felt the pain, with shares down roughly 69% over the past three months.
Image source: Getty Images.
Now what
Upstart is in the business of using technology to streamline the personal lending process for banks and credit unions.
At the height of its glory last October, Upstart's shares rose to $400 and it had a market cap of more than $30 billion. At this time, the company also traded at more than 50 times revenue. Given these valuation metrics, I certainly think a pullback was warranted.
The valuation looks better now, although not necessarily cheap. I'm still thinking about this stock cautiously and believe upcoming earnings will be helpful to tell us how origination volume is trending, as well as the state of new products. I expect demand and business operations will still be able to perform well in the first half of this year, with the second half a lot murkier right now.
