Upstart experiences stock tumble after announcement of convertible bonds

The shares of the AI-powered lending platform Upstart fell by 9.8% in the morning session after the company announced plans to issue $300 million worth of convertible bonds directed at qualified institutional buyers and due in 2029. The price decline is likely attributed to concerns regarding the dilution effects of these bonds, which can be converted into common shares of the company, thereby increasing the total number of shares outstanding. The stock market tends to overreact to news, and significant price drops can present good opportunities to buy high-quality stocks. Is this the right time to acquire Upstart shares? Our full analyst report is available to you for free here. Upstart's shares are extremely volatile, having recorded 66 movements of more than 5% in the past year. Against this backdrop, today's developments suggest that the market perceives this news as significant but not something that fundamentally changes the perception of the company. The biggest movement we've reported in the past year occurred about a month ago, when the stock rose by 48.9%. This happened after the release of second-quarter results, where revenue, adjusted operating income, and earnings per share (EPS) significantly exceeded analysts' estimates. Upstart also provided a revenue forecast and an optimistic outlook for the next quarter that far surpassed analysts' expectations. The management attributed the improved sentiment to advancements in their AI models. In retrospect, it was an impressive quarter that should delight shareholders. Since the beginning of the year, Upstart shares have fallen by 6.7% and are trading at $36.27 per share, which is 23.3% below their 52-week high of $47.31 from December 2023. Investors who invested $1,000 in Upstart’s shares at the IPO in December 2020 would now be looking at an investment worth $1,229. It should be evident by now that generative AI will have an enormous impact on how large companies conduct business. While Nvidia and AMD are trading near their all-time highs, we currently prefer a lesser-known yet still profitable semiconductor stock that is benefiting from the rise of AI. Here you can access our free report on our preferred growth story in the semiconductor sector.