Traditional principles of value investing encourage the production of conservative estimates to avoid downside risks. However, for companies with exceptional leadership teams and an option for new trades, growth can come from unexpected places.
Upstart connects borrowers to lenders with its artificial intelligence (AI) ready for consumption Platform. While it might seem too complex, Upstart has essentially created a range of models that can analyze over 1000 different variables to identify the optimal interest rate, the probability of default or prepayment, and several other characteristics of the borrower. . Partner banks or lenders can then grant loans of $ 1,000 to $ 50,000 to those borrowers in exchange for interest payments. Upstart, as an intermediary, then generates income in the form of referral fees.
Although data-driven credit rating is not a new concept, Upstart’s models would produce much better results. According to Upstart’s annual report, its system generates loss rates 75% lower than other major US banks while approving 27% more borrowers. While these better lending results do not sufficiently validate the effectiveness of the platform, Upstart has also just bolstered its forecast for 2021 by forecasting 114% revenue growth for the year, not only demonstrating more demand. high consumer demand, but also the bank’s willingness to lend to these borrowers.
While Upstart still has a lot to prove, there is no reason to believe that its senior executive in determining creditworthiness could not be applied to other areas of lending as well. But it’s not just investors who are speculating on new areas of growth. Upstart made its ambitions clear last month by acquiring Prodigy Software – an automotive retail software provider. In response to this push towards auto finance, CEO Dave Girouard said, “Automotive retail is one of the biggest buy-it-now, pay-later opportunities.
With the opportunist ex of UpstartGoogle management team and technology that can be applied to a range of industries, Upstart’s 21 times multiple futures revenue may not be as crazy as investors think.
Wix, the drag-and-drop website building and hosting platform, has demonstrated remarkable capacity for innovation over the years. For a simple subscription, Wix enables bloggers, photographers, fitness influencers, artists, e-commerce stores and more to create the website of their choice with its intuitive and editable custom layouts.
But it’s not just the subscription fees that Wix collects. In 2020, the gross payment volume on the platform grew 126% to $ 5.4 billion, as ecommerce spending accelerated. Through these expenses, Wix raised $ 53.6 million in revenue – 382% more than the previous year. Not too bad to have launched Wix Payments less than two years ago.
In addition to e-commerce, Wix has also seen rapid growth in the restaurant category. The number of restaurants using Wix to sell online has grown 143% over the past year, and to help them, Wix has acquired a digital ordering software provider, SpeedETab. Features like this not only add useful functionality for subscribers, but also allow Wix to monetize its user base in a number of ways.
Although Wix already has 5.5 million premium subscribers, CEO Avishai Abrahami expects the company to be able to power 50% of all new websites within five to seven years. While this may seem like an optimistic goal, if Avishai Abrahami is ultimately right and Wix serves as a home for half of the new websites on the internet, it will give rise to new methods of monetization.
With a market cap of $ 16.9 billion, Wix is currently trading at 13 times its revenue for the next 12 months. For a business that is expected to have an abundance of new avenues for growth as it adds more users, that price may not be as expensive as it looks.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.