Upstart Holdings (NASDAQ:UPST) stock fell 5.3% in Monday regular-session trading after the lending platform’s June remittance asset-backed securities data showed that multiple 2021-ST deals could trip their early amortization triggers in July. according to Wedbush analyst David Chiaverini in a note to clients.
The analysis applies the average rollover rate of 90-day delinquencies into cumulative net losses (“CNL”) using June’s CNL as a baseline. But, he also points out that rollover rates have been trending lower over the past few months, which may be a result of the company’s loan modification policy and tax refund season.
“A lower than average rollover rate may prevent the triggers from being tripped in the near month. Nonetheless, we are surprised at this level of deterioration given UPST’s loan modification policy change occurred in April 2022,” Chiaverini wrote.
Tripping early amortization triggers would indicate that Upstart’s (UPST) credit quality is performing worse than rating firm Kroll’s base case expectation, “which could lead to higher funding costs and less appetite from ABS and credit buyers in future periods, in our view,” the analyst said.
Chiaverini has an Underperform rating on Upstart (UPST). Note that Seeking Alpha’s Quant system flagged UPST in March for a high risk of performing poorly, citing decelerating momentum and overpriced valuation. By contrast, the average SA Authors’ rating is Buy.
See JR Research’s bullish take on UPST, saying the stock has played out as expected
Read More: Why did Upstart stock drop today? Concerns over delinquency rates (NASDAQ:UPST)