Lending firm Upstart’s dismal revenue outlook drags the sector down

May 10 (Reuters) – Shares of Upstart Holdings (UPST.O) fell nearly 60% on Tuesday after the AI-powered lending platform cut its full-year revenue forecast, anticipating a decline in demand for loans in a context of rising interest rates in the United States.

The fintech stock was on course to erase most of its gains since its IPO in December 2020, the pandemic’s latest favorite to bear the brunt of the end of accommodative monetary policy.

The average price of loans on Upstart’s platform has risen more than 300 basis points since October, the company said on its conference call.

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Upstart, which makes most of its money from fees paid by banks using its platform, lowered its annual revenue target to $1.25 billion from $1.40 billion earlier as it expects loan volumes to suffer this year.

Buy now, pay later lender Affirm (AFRM.O) fell 15% as Upstart’s results raised concerns about the health of the overall consumer lending business. Affirm is expected to release its third-quarter results on Thursday.

“If companies are unprofitable and fail to generate cash flow in an environment of rising rates and depleted liquidity, many investors cannot justify owning them,” said Thomas Hayes, chairman of Great. Hill Capital in New York.

Consumer lenders LoanDepot Inc (LDI.N) and LendingClub Corp (LC.N) fell 20% and 7.3% respectively. PayPal Holdings Inc (PYPL.O) and Block Inc (SQ.N), which entered BNPL, lost 1.3% and 2.1% respectively.

Online lender SoFi Technologies Inc (SOFI.O) fell 18% before being halted amid reports that its first-quarter results were leaked ahead of its scheduled post-market release on Tuesday.

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Reporting by Medha Singh and Anisha Sircar in Bengaluru; Editing by Devika Syamnath and Sriraj Kalluvila

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