Should you buy or sell Upstart shares after BofA's double-downgrade?

On Monday, Upstart Holdings Inc. (NASDAQ:UPST) shares declined by 4% after receiving a double-downgrade from BofA. Analyst Nat Schindler downgraded UPST shares to sell from outperform. The analyst said the recent rally in the stock has priced in expected short-term growth. 

Upstart shares are up more than 750% this year and over $1,170 since going public in December last year. Schindler thinks the surge in the stock price leaves little room for more upward movement.

In a note to investors, the analyst wrote:

On the contrary, the consensus Street rating remains largely bullish with an overweight (buy) rating, short-term or otherwise.

Is it too late to bet on UPST’s growth?

From a valuation perspective, Upstart shares trade at steep trailing 12-month and forward P/E ratios of 599.08 and 266.61, respectively. As a result, short-term value investors may opt for alternatives in the market.

On the other hand, with analysts predicting an EPS growth of 478.30% this year before extending further by 29.50% next year, growth investors could be looking to pounce on the stock.

Therefore, Upstart could still be a good stock to buy going to the tail-end of the year.

Technically, Upstart shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock has spiked to overbought conditions, creating a perfect opportunity for a pullback.

Therefore, investors could target short-term pullbacks at about $336.97, or lower at $284.10. On the other hand, if the rally continues, the stock could find resistance at $402.57, or higher at $449.62.

It could be time to short UPST

In summary, given Upstart’s year-to-date gain of more than 750% and its steep valuation multiples, the stock could pull back significantly as more investors decide to take profits.

Therefore, although the company offers exciting long-term growth prospects, it could be time to sell before adding back to your portfolio.