Two stocks experiencing significant decreases - one by 83% and the other by 23% - are prime candidates for potential investment at the moment.
In a significant milestone, Upstart, the AI-driven lending platform, reported its first quarter of profitability in years during the second quarter. This achievement was accompanied by a surge in various key metrics, particularly in Mexico.
The customer count in Mexico saw a 70% increase over the past year, with deposits more than doubling to $5 billion and revenue almost doubling to $245 million. Loans originated by Upstart in the second quarter were up 159% year over year to 372,599.
Upstart's earnings per share stood at $0.05 on sales of $257 million in the second quarter. The strong performance of Upstart's artificial intelligence lending platform was evident in these numbers.
However, the quarterly report led to significant sell-offs due to comments about inflation and increasing competitive intensity. Despite this, Upstart's guidance for sales to increase roughly 66% annually this year suggests strong momentum, despite a potential deceleration from the growth seen in Q2.
Meanwhile, Nu Holdings, Upstart's parent company, has faced challenges. Its stock is currently down 23%, reflecting the broader financial sector's volatility. Nu only holds about 5% of the market share of gross profit in Brazil, where it is a significant player, and is still a small presence in Mexico and Colombia.
Despite these challenges, Nu has managed to maintain a favourable cost structure. Its cost to serve has remained mostly unchanged below $1, while its average revenue per active customer continues to climb. This is particularly impressive when compared to the average revenue per active customer for incumbent banks, which stands at $40 per customer.
The financial sector, including the S&P 500 Financials Sector index, has shown resilience in the past year. It has delivered a total return of 25%, with the S&P 500 index gaining 20% over the same period.
Amidst this market uncertainty and political unrest in France, certain financial sector companies are showing potential for strong rebounds. Notable entities include high beta names and covered bond issuers, particularly French entities such as Arkea and CAFFIL. These companies' secondary market performance and issuance pricing indicate buyer focus.
Approximately 85% of Nu's customer base is active, and 60% uses Nu as its main bank. Roughly 60% of the adult population in Brazil is on Nu's platform, positioning the company for future growth.
Warren Buffett and Berkshire Hathaway previously held shares in Nu Holdings, adding a seal of approval to the company's potential. As the financial landscape continues to evolve, Upstart and Nu Holdings remain key players to watch.
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