The BNPL Boom May Be Fading

The BNPL Boom May Be Fading

Upstart Holdings, a supplier of consumer loans, released its first-quarter earnings yesterday after the bell. The company’s stock is down 53 percent in early trade today as a result of that particular set of facts. What led to such a terrible crash? Rising lending rates appear to be harming demand for the business’s goods, the company said when it lowered its expectation for revenue growth for the year. Investors no longer view Upstart as a darling due to this year’s slower growth, projected declines in net income, and a market where interest rates are anticipated to climb even more.

Poor guidance from Upstart affects more than just its own stock. Following the release of Upstart’s findings, the price of Affirm’s stock also decreased. Shares of Affirm dropped 17.5 percent during yesterday’s regular trading hours, and in the morning session today, they touched a 52-week low of $18.39. This morning, an analyst downgraded the firm as well. At the start of trading today, Affirm’s stock recovered to a more modest 5% decline, but it’s obvious that investors are equating Affirm’s value with Upstart’s performance. This is a reasonable move considering that both companies provide unsecured consumer credit, even though their go-to-market strategies differ.

Only a portion of the tale explains the two firms’ dramatic value decrease. The BNPL market is filled with startups, therefore a significant portion of fintech has just seen a significant price increase. Startups seeking BNPL or a comparable consumer credit product currently have a significantly lower present value and a lot more difficult exit strategy. Despite the market’s reaction, Upstart had a strong first quarter. Let’s discuss the remainder of the year and how concerned we should be about BNPL startups in the future.

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