The technology industry has been front and center since last year as the dependence on technology accelerated because of the pandemic.
However, this pandemic-driven tech boom might finally come to an end soon because the industry is facing several headwinds, ranging from a global semiconductor shortage to reduced e-commerce sales with the resurgence of brick-and-mortar shopping. In addition, concerns surrounding rising cybercrime constitute a significant challenge.
Because investors are expected to focus on cyclical and outdoor stocks amid the accelerated economic recovery, Wall Street analysts expect the prices of tech stocks Upstart Holdings, Inc. (UPST) and Doximity, Inc. (DOCS) to slump in the coming months.
Upstart Holdings, Inc. (UPST)
UPST is a cloud-based Artificial Intelligence (AI) platform that connects individuals, banks, and institutional investors that are striving to increase their access to credit and to reduce risk and cost. The company went public through the traditional IPO process on December 16, 2020, listing nine million shares on the Nasdaq stock exchange. UPST is headquartered in San Mateo, Calif.
On September 8, UPST announced a partnership with Water and Power Community Credit Union (WPCCU) to reach out to new customers and provide personal loans. However, this venture’s success depends on customers’ willingness and ability to borrow. Thus, it might take some time for UPST to profit from this partnership.
A few days earlier, UPST launched the Spanish language version of its personal-loans platform to accelerate inclusivity. But the Spanish version of the auto loan product is still a ways off. In its fiscal second quarter, ended June 30, UPST’s revenue increased 1,017.7% year-over-year to $193.95 million. However, its total operating expenses also increased 448.5% from the same period last year to $157.65 million. This can be attributed to a 1,296.5% year-over-year rise in sales and marketing expenses to $75.92 million.
The stock has gained 69.3% in price over the past three months and 107.6% over the past month. However, the $207.00, 12-month median price target for UPST indicates a 24.5% potential downside.
UPST’s POWR Ratings are consistent with this bleak outlook. The stock has an F Stability grade, and a D Value grade. In the 106-stock, D-rated Financial Services (Enterprise) industry, it is ranked #49. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Click here to see additional POWR Ratings for UPST (Growth, Momentum, Sentiment, and Quality).
Click here to check out our Cloud Computing Industry Report for 2021
Doximity, Inc. (DOCS)
DOCS in San Francisco is a cloud-based digital platform that provides tools, news and research for medical professionals. The company went public with an IPO listing of its class A common stock on June 24, 2021.
On April 20, before the company went public, it declared that 150 health systems had subscribed to its Doximity Dialer Enterprise to supply telehealth services directly to patients at a distance. However, as people reschedule in-person health check-ups with the gradual economic reopening, the services’ subscription rate might decelerate in the coming months.
Although DOCS’ revenue increased 99.7% year-over-year to $72.7 million in its first fiscal quarter of 2022, ended June 30, its non-GAAP operating expense also rose 37.6% from the same period last year to $34.68 million. Its non-GAAP sales and marketing expenses increased 42% from the prior-year quarter to $18.08 million.
The stock was down 4.6% in price over the past five days to close yesterday’s trading session at $93.75. Analysts expect the stock to hit $63.50 soon, indicating a 32.3% potential downside.
Under POWR Ratings, DOCS has been accorded a D rating for Value and Stability. Additionally, it is ranked #40 of 82 in the Medical – Services industry.
To see additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for DOCS, click here.
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UPST shares were trading at $287.76 per share on Thursday afternoon, up $13.43 (+4.90%). Year-to-date, UPST has gained 606.16%, versus a 20.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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