These 3 Beaten-Down Financial Stocks Could Have Farther to Fall

Despite a broader rally in financial stocks, Chime Financial, Progressive, and Upstart Holdings are underperforming due to distinct company-specific headwinds. Chime faces potential de-rating if its ambitious profitability targets, which underpin its $7 billion market cap, are not met; Progressive is grappling with increased competitive pressures impacting pricing and valuation, alongside a one-time regulatory rebate; and Upstart is vulnerable to deteriorating consumer lending conditions, as highlighted by the Tricolor bankruptcy, which threatens its AI underwriting and loan resale model given its high 39x forward earnings multiple. These factors collectively position all three for potential further price declines.

Analysis

Despite a broader rally in financial stocks driven by expectations of lower interest rates and normalized inflation, Chime Financial (CHYM), Progressive (PGR), and Upstart Holdings (UPST) have significantly underperformed year-to-date, facing distinct company-specific headwinds. All three are identified as being at risk of further price declines through 2025 and into 2026 due to these fundamental challenges.

Chime Financial, a fintech mobile banking platform, has seen its shares slide from a $43 IPO debut to $19, with its $7 billion market cap heavily reliant on ambitious profitability targets, including reaching near-breakeven by 2026 from a current -$4.24 EPS. Progressive's recent earnings miss, attributed to a one-time Florida regulatory rebate, is compounded by persistent increased competitive pressures, which Morgan Stanley cited in its downgrade to underweight, noting its 15x forward P/E is higher than Allstate's <10x.

Upstart Holdings faces significant risk from a deteriorating consumer lending market, evidenced by the Tricolor bankruptcy, which threatens its AI-based underwriting and loan resale model. Its shares, trading at a pricey 39 times forward earnings, are particularly vulnerable to a substantial de-rating if future growth and earnings expectations are not met or need to be revised downwards.

Key Decisions for Investors

• Monitor Chime Financial's execution against its ambitious profitability targets, as failure to meet these could trigger a significant de-rating.
• Investors should carefully assess Progressive's competitive pressures and their potential impact on its economic moat and valuation relative to peers.
• Given Upstart Holdings' high valuation and sensitivity to consumer credit cycles, investors should scrutinize its exposure to worsening loan performance and the sustainability of its growth projections.