To be clear, UPST is an AI-driven lender–and a company I don’t know that much about. It suffers, to my mind, from the affliction that’s common to all financials–that it’s hard to know for sure how solid the loan book is.

The stock was a pandemic darling, cresting at just over $400 a share before a steep downhill ride to $11 or so earlier this year. It’s about $43 as I’m writing this. Book value is under $10/share–meaning, as I see it, if UPST were liquidated today, a one-share holder would have a ten-dollar bill + an interest in any intellectual property, distribution apparatus and warm customer feelings the company might have engendered.

So holders have got to be thinking that the potential of the UPST AI-driven business is worth $30+ per share today. That’s down from, say, $390 at the 2021 top and $4 or so a few months ago.

I have no clue about what the right number is.

Why I’m interested in UPST and what I think about it is this:

–at some point in the evolution of the market through a down phase and approaching the next up period, the (sometimes wildly) overvalued darlings of the previous cycle get completely trashed. At some point they may trade at below liquidation value. This typically marks an important bottom. The way I read UPST, this happened late in Q1.

Btw, Carvana (CVNA) is another stock among many exhibiting the same behavior. It peaked at just over $370 a share in 2021, fell to a tad above $7 in late March, and is $35 as I’m writing this. Book value at yearend 2022 was slightly negative.

–/for me, it would be a mistake to chase this wave after a gigantic move up that could easily be cresting right now. What it signals, to my mind, is that it’s now safer than it’s been in a couple of years to try to figure out winners vs. the losers in what I think will be a relatively conventional business expansion.