Upstart (NASDAQ:UPST) has been one of this year’s top performers. Shares of UPST stock are up over 260% year-to-date (YTD), from around $40 at the start of 2021 to $151 as of the close of Dec. 13.

You probably wouldn’t realize that if you’ve just tuned into the Upstart story, however. While UPST is up huge on the year, the gains have shrunk dramatically from where they were back in October. At that point, the stock had briefly hit $400 as speculative fervor peaked.

The top soon came following an embarrassing interview on CNBC. The business channel had on stock trader Mark Minervini to discuss UPST stock and Minervini talked up the company’s strong technicals and momentum. However, when the CNBC host asked Minervini to explain Upstart’s business model, he froze up. Seemingly unable to answer, Minervini blamed audio issues and the interview abruptly ended.

That moment went viral and the UPST stock price soon started to crash. It seems a lot of people, like Minervini, appreciated Upstart primarily because of its strong price performance rather than the company’s actual business. With the momentum in the stock long gone, however, is it time to buy in during this correction?

UPST Stock: Rapid But Slowing Growth

At first glance, Upstart’s third-quarter earnings report didn’t look too bad. The company beat estimates on both the top and bottom line. In particular, the earnings figure was substantially ahead of expectations. Based on that, you might have thought Upstart would rally on the results, or at least hold its ground. Instead, UPST stock immediately plunged 20% upon the Q3 release.

What went wrong? For one thing, investors had their expectations in the stratosphere. Analysts may have had more conservative numbers, but quick money traders were expecting massive growth in Q3 after Q2’s blowout earnings. Instead, Q3 was only moderately ahead of expectations.

Specifically, Upstart’s growth rate showed the issues. For the quarter, revenue growth slowed to 18% sequentially versus 60% in Q2. That’s a massive decline. And that came even as some analysts have become concerned that Upstart may be lowering loan quality standards to attract more business. Adding to that point, while the company grew revenues sequentially, the contribution margin actually declined slightly in Q3 versus Q2.

Long story short, Upstart’s incredible growth phase appears to be drawing to a close. Meanwhile, shares are trading at 100 times this year’s earnings and a projected 77 times forward earnings, according to Seeking Alpha. That’s far too high for a company with rapidly slowing revenue and earnings growth. On top of that, add the fact that it faces substantial cyclical concerns if and when the economy turns downward once again.

UPST stock completed its initial public offering (IPO) at $20 per share just a year ago. It’s no surprise that the stock is having trouble supporting a price 10 times that high just a year later. Momentum traders got way over their skis on this one.

Analysts Also Worry About Valuation

I’m hardly the only person that’s concerned about Upstart’s valuation, too. For example, Morgan Stanley initiated coverage of Upstart shares last week with a neutral rating.

Morgan Stanley’s James Faucette did credit the company for its rapid growth. However, Faucette also warned that it has benefitted from unusually favorable credit conditions among other tailwinds. The analyst is monitoring Upstart for incremental changes to the growth story.

In the meantime, it’s not exactly encouraging that Faucette assigned UPST stock a neutral rating on shares with the stock already back under $200. Just because this name hit $400 before doesn’t necessarily mean it’s a bargain below $200 per share.

The Verdict on Upstart

The last time I covered Upstart, I took an unequivocally negative view, warning that it was “overvalued and set to crash.” Indeed, the stock has plunged from $300 to below $160 since that article’s publication. That wasn’t too complicated of a call — there was absolutely no way to justify a valuation anywhere near that level.

However, the investment case now is a little more nuanced with the stock down a quick 50%. At this point, shares are oversold — rather than overbought — on a short-term basis. To some extent, UPST stock has gotten hit with tax loss and momentum-based selling as people that bought at $300 and above sell out of shares to move their capital elsewhere.

So, would it be surprising if UPST stock bounces once the calendar flips into 2022? Not at all. Over the longer-term, though, Upstart remains seriously overvalued compared to its medium-term business prospects. The company will need to expand into more lending verticals — without letting credit quality slide — if it’s going to support a triple-digit price going forward.

On the date of publication, Ian Bezek did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at?@irbezek.