2 Overlooked AI Stocks to Buy Before They Soar Up to 100% in 2026, According to Wall Street Analysts

Upstart and Atlassian have materially lagged the S&P 500 YTD (Upstart -22%, Atlassian -34% vs S&P +18%) despite issuing strong recent quarters and bullish analyst targets; Citigroup’s top Upstart target of $80 implies ~70% upside and Morgan Stanley’s top Atlassian target of $320 implies ~100% upside. Upstart reported Q3 revenue +71% to $277M and non-GAAP EPS $0.52 (vs a loss of $0.06 LY), newer products now ~12% of originations, loans on pace to outpace 2‑year Treasury yields by 7.4ppt, and consensus adjusted EPS CAGR ~51% through 2026 at ~33x earnings. Atlassian posted Q1 FY25 revenue +21% to $1.4B and non-GAAP EPS $1.04 (+35%), reported a 50% quarter-over-quarter increase in clients using AI features, consensus adjusted EPS CAGR ~22% through June 2027 and trades around ~41x earnings with analyst median and high targets implying substantial upside.

Analysis

Market structure: UPST and TEAM are primary beneficiaries as monetizable AI adoption shifts economic profit to platform owners — Upstart accelerates originations (revenue +71% Y/Y; newer products ~12% of originations) while Atlassian expands across departments (revenue +21% Q/Q). Incumbent credit score vendors and banks with rule-based underwriting lose pricing power; winners are banks that rapidly integrate UPST which can expand approval rates and effective yield spreads (Upstart-originated yield >2yr Treasury by ~7.4ppt). Competitive dynamics favor scale: marginal customer wins for TEAM can turn into enterprise-wide ARR expansion; Upstart’s unit economics are sensitive to loss rates and mix toward auto/home loans.

Risk assessment: Key tail risks include regulatory action on AI-driven credit decisions (fair-lending suits or new disclosure rules) and a macro credit shock that increases delinquencies >200–300bps, which could erase Upstart’s 33x forward multiple quickly. Immediate (days) risks are earnings/guide misses and volatility spikes; short-term (weeks–months) risks include partner churn or slower AI rollout; long-term risks (quarters–years) hinge on sustained CAGR assumptions (UPST ~51% to 2026; TEAM ~22% to 2027) and data exclusivity for model advantage. Hidden dependencies: partner bank economics, access to labeled repayment data, and customer expansion cadence for AI agents.

Trade implications: Tactical approach — establish small, size-constrained long exposure: UPST 2–3% portfolio on weakness to ≤$40 with stop at $30 and target $80 (cite Citigroup bull). For TEAM, scale into a 2–4% position: 50% now at ~$160 and add on pullback to $120, target median $230 and bull $320. Pair trade: long TEAM vs short broad software laggard (e.g., overweight TEAM vs underweight IT ETF) to capture multiple re-rating. Options: buy 12–18 month LEAPS to cap downside — UPST Jan 2027 $60 calls (50–75% OTM) sized as 0.5–1% notional; TEAM buy Jan 2027 $240 calls (50% notional) or sell covered calls if assigned.

Contrarian angles: Consensus understates model concentration risk — a handful of bank partners drive a large share of originations, so partner loss is non-linear downside. The market may be over-penalizing AI software winners (TEAM) and under-penalizing loan-performance sensitivity (UPST); historical parallels include LendingClub/OnDeck where credit cycle and regulation reset valuations. Unintended consequences: aggressive cross-selling of new loan products could dilute credit quality; conversely rapid AI agent adoption could produce >2x ARPU expansion if Atlassian converts 20–30% of customers to paid AI features within 12 months.

Key Decisions for Investors

• Establish a disciplined 2–3% long position in UPST on pullback to ≤$40 (or immediately size 1–1.5% if averaging), set a hard stop-loss at $30, and plan to take profits at $80 (70% gain) or if 90-day delinquency trends spike >150bps.
• Build a 2–4% staged long in TEAM: 50% now at ~$160 and add up to target allocation on dip to $120; trim to target $230 (median) and aggressively trim at $320 (Morgan Stanley bull).
• Implement a pair trade: long TEAM (overweight by 2%) vs. underweight IT sector ETF (e.g., -2% XLK) to capture relative re-rating while hedging macro beta over next 6–12 months.
• Use options to leverage conviction with defined risk: buy Jan 2027 LEAPS — UPST $60 calls (size = 0.5–1% portfolio risk) and TEAM $240 calls (size = 1%); alternatively write covered calls on TEAM if allocation exceeds 3% with strike ≥$230 to fund carry.
• Monitor regulatory signals and delinquency metrics weekly for 90-day trends and any CFPB/SEC guidance; if new regulation limiting algorithmic underwriting is proposed or 90-day delinquencies rise >200bps, reduce UPST exposure to <0.5% within 30 days.