We can't have international stocks on strawman right now, but I thought opening a forum to share ideas might be of use......
The first idea I would like to share is Upstart (NASDAQ: UPST).
Upstarts Mission: "Our mission is to enable effortless credit based on true risk. We are a leading artificial intelligence (AI) lending platform designed to improve access to affordable credit while reducing the risk and costs of lending for our bank partners. Our platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional, credit-score based lending models."
What Upstart is not: They are not a lender per se, and have negligible credit risk - all credit asets are sold onto banks / corporate bond holder, or is funded directly via partnerships.
Value proposition: They reduce default losses for banks and creditors, and improve access to competitive lending rates and a streamlined lending process to borrowers.
Moat: Unique AI driven platform that assesses creidt riks better than tradiitonal means, and it gets better with every loan processed. It is difficult for banks to establish a similar product, and are now years behind in capability. It is just cheaper and easier for them to partner with Upstart.
Analysis from credit agencies show Upstart approved loans have lower default rates, despite having generally lower FICO average scores (legacy credit scores), and consumers rave about the loan application process.
Latest results
Q2 2021 Revenue: $194 Million, up 1018% on pcp, and 60% on Q1 2021 (this is not a type 'O' )
Application conversion rate of 24%, up from 9% on pcp (AI learning improvements shining through).
GAAP Income of $37 M (yes in is profitable).
Upstart platform just covers unsecured lending presently, and has been growing despite headlinds casued by stimulous money.
Upstart has established an auto lending service (Prodigy). It has processed 5000 loans to train the AI, and is now established in 47 US states. It is rapidly signing up banks, the new business will begin to contribute to proftis form FY2022. Auto lending market is 8x the unsecured lending market.
Upstart founders are very ambitious and wish to bring their platform to the world and change the way credit risk is priced.
RISKS:
1) The prospects of Upstart are tied to the market cycle, and it is yet to be truly tested in a normal, post-pandemic recession....the one where banks are allowed to fail.
2) Lender concentration - They have one large lending relationship, which generates a large proprtion of revenue. But this is declining - very rapidly.
3) Sale of credit. Creditors may be reluctant to take on further credit due to economic conditions / increasing defaults. If they do, this will hinder Upstarts revenue growth.
4) Competiton. Competitors, with significant resources, may enter the market and develop a compating platform. It is feasible, given the proftability of the bsuienss model, and the enormous TAM opportunity.