The Upstart Holdings Short Squeeze Could Have Further to Run

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Upstart Holdings stock is experiencing a huge short squeeze at present. Year to date, the FinTech stock is up more than 400%.

Can the short squeeze continue? Let’s take a look at the short interest data.

High Short Interest

Looking at the short interest data on Upstart, there are reasons to believe that the short squeeze could have further to fun.

Currently, short interest is still very high. At present, 24.2 million UPST shares are on loan. That represents 34.0% of the free float. Meanwhile, utilization (a measure of demand from short sellers) is also high at 76.8%. So, the stock is still very heavily shorted. This means that we could see plenty of short covering from here, which would most likely push the share price up.

It’s worth noting, however, that the days-to-cover ratio (which shows how many days it would take short sellers to cover their existing positions) here is not that high. At present, it is under 3 days. So, short sellers could unwind their positions within several days if they wanted to.

Improved Sentiment

Looking beyond the short interest data, sentiment towards the FinTech stock is improving rapidly.

Recently, Upstart has been getting a lot of attention due to the fact that it operates in the artificial intelligence (AI) space. While investor interest in AI remains strong, the stock could keep moving higher.

The company has also published some good news. In May, Upstart posted better-than-expected revenue and a smaller-than-expected loss for the first quarter of 2023 and announced that it had secured an additional $2 billion in funding. It also announced that alternative investment firm Castlelake LP had agreed to purchase up to $4 billion of consumer instalment loans.

On top of this, there has been some insider buying. In late May, we noted that board member Kerry Whorton Cooper had purchased 2,000 shares in the company. This represented the first stock purchase from an insider since the company’s Initial Public Offering (IPO) in 2020.

Putting this all together, we think the short squeeze here may continue in the near term.