What happened
Shares of the artificial intelligence lender Upstart Holdings (UPST 3.90%) traded nearly 9% lower as of 2:40 p.m. ET after receiving some negative sentiment from Wall Street.
So what
Atlantic analyst Simon Clinch in a research note today maintained his overweight rating on Upstart stock but lowered his price target to $170 per share, which still implies significant upside from Upstart's current price of around $88.
Clinch in his note attributed the lower price target to "a potentially new backdrop of hostility toward growth stock multiples."
Just today, another tech lender, LendingClub, saw its shares plunge nearly 28% after recently reporting earnings results for the fourth quarter of 2021 that beat analyst estimates but included lower earnings guidance for 2022 than analysts had been projecting.
Image source: Getty Images.
Now what
Tech and growth stocks have been taking a beating since last November when it became clear that the Federal Reserve would move up its timeline for tapering the bond-buying program it launched at the onset of the pandemic and raising its benchmark overnight lending rate. The Fed now looks like it will begin rate hikes in March. It has also talked about shrinking its balance sheet, which would effectively remove liquidity from the economy.
The Fed's new outlook has created a very harsh environment for growth stocks, so Clinch may have a point about the hostility toward growth multiples.
But I am also reluctant to agree with Clinch's price target right now. Upstart may face growth issues of its own and has seen some higher delinquency rates on its loan originations that I would like to learn more about on the company's upcoming earnings call.
