The BNPL boom may be fading

Consumer lending provider Upstart Holdings reported its first-quarter results yesterday after the bell. In the wake of that particular set of data, shares of the company are off 53% in early trading today.

What caused such a catastrophic crash? The company cut its revenue growth forecast for the year and said rising loan rates appear to be hurting demand for its product. Slowing growth this year, potentially slipping net income and a market in which interest rates are expected to rise even more have made Upstart an un-darling in investors’ eyes.

Upstart’s poor guidance isn’t just hurting its own shares. The value of Affirm’s stock also fell after Upstart’s results came out. After falling 17.5% during regular hours yesterday, shares of Affirm hit a 52-week low of $18.39 in early morning trading today.┬áThe company also suffered an analyst downgrade this morning.

Affirm’s stock recovered to a more modest 5% decline at the start of trading today, but it’s clear that investors are linking Upstart’s results to Affirm’s value, a reasonable move as both offer unsecured consumer credit even if their go-to-market motion is different.

The shocking decline in the value of the two companies is only part of the story. There are myriad startups in the BNPL market, meaning that a large piece of fintech was just heavily repriced. Startups pursuing a BNPL or similar consumer credit product now have a far lower present-day value, and their path to exit much steeper.

Market reaction aside, Upstart actually had a solid Q1. Let’s talk about the rest of the year, and just how worried we should be about BNPL startups looking ahead.