Many growth stocks have steadily risen from their lows, giving investors hope that the worst is over. As of this writing, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is near $100 after falling to the low $80s, Upstart Holdings (NASDAQ: UPST) is threatening $20 after falling to $12, and Wayfair (NYSE: W) has roughly doubled from its low of $28. Could a new lawsuit threaten Alphabet's advertising business?
The landscape has been quite challenging for financial companies over the past 18 months, as the Federal Reserve raised interest rates at a rapid pace, consumers were challenged by inflation, and the possibility of recession caused banks to increase their loan loss reserves, compressing net income. First, fintech companies are generally one- or two-product companies, as they are much earlier in their lifecycles than diversified big banks are. Second, there's a perception that fintechs may target a less creditworthy consumer, given that most fintechs tout new ways of underwriting clients overlooked or overcharged by traditional banks.
Upstart (NASDAQ: UPST) suffered a 97% decline from its peak in mid-2021 to the end of 2022. Rising interest rates hammered the loan market as consumers became increasingly reluctant to apply for personal and auto loans. The question for investors is whether that January recovery means Upstart is finally ready to surge higher again.