Upstart Holdings, Inc. (UPST) stock intrinsic value fair value estimate & owner earnings analysis

Upstart runs an online lending marketplace. Its lending partners use its AI models to approve and price personal loans, auto loans and home equity lines, and Upstart earns platform and referral fees ($793.0 million in 2025) plus servicing fees ($157.0 million). It also buys and holds some loans on its own balance sheet, funded partly by borrowing. All of its revenue comes from the United States. Total revenue was $1,043.9 million in 2025, up 64% from $636.5 million in 2024, after falling 39% in 2023 from $842.4 million in 2022. Loan volume facilitated on the platform rose 86% in 2025, to $11.0 billion from $5.9 billion. How we measured earnings. We start from cash generated by operations and remove two kinds of noise. First, swings in the loan inventory Upstart buys and resells (in 2025 it bought $9.07 billion of loans for sale and sold $8.68 billion), together with the non-cash change in the value of those loans, because these move with volume and timing rather than earning power. Second, we deduct stock-based compensation as a real cost: it was $132.0 million in 2025 and $175.0 million in 2023. We also deduct the spending needed to keep the business running, including capitalized software. On that basis, per-share owner earnings were $1.44 in 2021, then negative in every year since: -$1.76 in 2022, -$2.36 in 2023, -$1.57 in 2024 and -$0.12 in 2025. Reported 2025 net income was $53.6 million, but stock compensation alone was about 2.5 times that figure, and the cash flow statement shows $113.7 million of non-cash gains in the value of loans within that profit. Our starting level is the middle of 2022 through 2025, which covers both the 2022-2023 revenue decline and the 2024-2025 rebound. That middle value is about -$1.67 per share. We do not use 2021 because it was a single unusually profitable year that the business has not matched since. The change in owner earnings in 2025 was an improvement of about $128 million, from -$140.8 million to -$12.4 million, on $407 million of added revenue. We assume no further improvement in the base case because loan volume depends on lending partners and investors continuing to supply funding on agreed terms, which the company itself lists as a risk to revenue, and only one year of this improvement has been reported. Bear case: $0 per share. Owner earnings have been negative in each of the last four years, stock compensation has been at least $125.9 million a year over that span, and revenue fell 39% in 2023. A shareholder cannot owe more than the shares are worth, so we stop at zero. The company also carries convertible notes: $431.3 million due 2029, $500.0 million due 2030 and $690.0 million due 2032, and it has repurchased at least $566.8 million of the $661.3 million 2026 notes. Base case: $0 per share. Owner earnings stay near breakeven at the 2025 level. We credit no growth, because nothing in the filings locks in future volume or margin gains, and we do not count the 2025 rise in loan volume or in the share of rate inquiries that become loans (19.4% in 2025 versus 15.1% in 2024) as certain to continue. Bull case: $3.67 per share. Upstart sustains earnings equal to its 2025 reported net income of $53.6 million, or about $0.50 per diluted share (107.5 million shares), for ten years, with no growth and nothing assumed after year ten. Discounting at 6% gives about $3.67 per share. This uses only a profit level the company has actually reported, and it is a bull case because that profit has been reported for only one year. What could make us wrong. If the 2025 improvement continues and volume holds, earnings could exceed the bull case. If funding tightens, volume could shrink faster than costs, as revenue did in 2023. We could not fully separate the cash value of the non-cash loan gains within the cash flow statement, so our earnings figures may be conservative. The company also had $798.8 million of book equity at the end of 2025 (about 98.0 million shares outstanding). We give it no separate credit because we value the business on its earning power. Margin-of-safety price: about $1.00 per share, applying only once the business condition above is met, because the evidence supports little value today.