Upstart, LendingClub downgraded at J.P. Morgan amid fintech caution

Upstart Holdings (NASDAQ:UPST) stock slid 4.8% and LendingClub (NYSE:LC) stock fell 2.9% in Monday premarket trading after J.P. Morgan analyst Reginald Smith downgraded the two stocks as he becomes more cautious on fintech names due to valuation and growth concerns.

Smith cut Upstart (NASDAQ:UPST) to Underweight from Neutral on valuation “as shares seem to be priced to perfection.” LendingClub (NYSE:LC) was downgraded to Neutral from Overweight “in favor of faster growing names.”

Two rate cuts, positive CQ3 earnings and management comments drove a rally in fintech stocks. The aggregate market cap of J.P. Morgan’s fintech coverage jumped more than $65B since mid-September, the analyst noted.

Even though he sees lending volumes and gain on sale margins improving in 2025 on lower benchmark rates and an improved third-party funding outlook, Smith prefers to wait until after the CQ4 earnings season for a more attractive entry point.

J.P. Morgan’s top pick in fintech for 2025 is Kazakhstan’s JSC Kaspi (OTC:KSPI) “as underlying fundamentals are as strong as ever and low-hanging fruit on the investor messaging side should drive improved stock sentiment.”

Shopify (SHOP) and Affirm Holdings (AFRM) as core holdings, “as both are growing revenue and volume at or above pandemic levels, defying broader e-commerce trends.”

Among the five stocks mentioned in the J.P. Morgan note, the SA Quant system only ranks one of them, LendingClub (LC) a Buy, and a strong one at that. UPST, KSPI, SHOP, and AFRM all get Hold ratings.