While the COVID-19 crisis imposed a horrific nightmare, the pandemic sparked a radical paradigm shift in the workforce. Depleted of options, employers of white-collar industries had no choice but to implement a mass work-from-home experiment. However, now that many employers are recalling their worker bees back to their posts, at least a few reluctant workers may branch out on their own. In that case, two gig economy stocks – PayPal (NASDAQ:PYPL) and Upwork (NASDAQ:UPWK) – may benefit.
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During the early phase of the global health crisis, several technology-related firms that enabled people to operate remotely performed meteorically well. However, as TipRanks contributor Joey Frenette noted, following social normalization trends, many of these hot commodities deflated sharply. Indeed, some of the biggest work-from-home (WFH) securities lost over 80% of their equity value from peak to trough. Cynically, though, gig economy stocks may pick up where WFH plays tumbled.
Mainly, the narrative comes down to economic realities. In late August, the Federal Reserve signaled that inflation represented a massive threat to longer-term economic stability. Committing to its hawkish monetary policy, the Fed recently raised the benchmark interest rate by 0.75%. However, the latest September jobs report – which came in hotter than economists anticipated – will likely cause the central bank to act more aggressively in its tightening strategy.
Usually, governments seek strong labor markets for their nations as it directly correlates with higher spending. In turn, this increased spending should boost broader economic activity, leading to additional people being hired. However, this dynamic also implies that more money is chasing after fewer goods, leading to the very inflation problem that the Fed wants to control.
The way the central bank sees it, it must deflate the labor market to reduce escalating consumer prices. Therefore, recession fears are underway, with many prominent companies already announcing layoffs. Such a circumstance would not bode well for workers who insist on telecommuting because it makes them look less like team players.
Arguably most will capitulate due to unfavorably shifting economic realities. However, some folks will resist, branching out on their own as independent contractors, and that might very well help the below gig economy stocks to buy.
PayPal (PYPL)
A specialist in the financial technology (fintech) space, PayPal provides an online payments system along with business management tools geared for entrepreneurs. By facilitating intuitive transactional services along with administrative matters such as invoicing protocols, PayPal enables independent contractors to get up and running quickly, making it one of the most powerful names among gig economy stocks to buy.
Still, the risk-off nature of the current equities sector environment disproportionately hurt PYPL, with the company losing about 55% of market value on a year-to-date basis. Nevertheless, the selloff is arguably too steep. While competitive concerns exist for PayPal, the brand ranks as one of the most well-known in the world. Since people tend to gravitate toward the familiar, the upside narrative for PYPL stock likely remains intact.
As well, PayPal’s business profile is significantly undervalued. Anchored by a solid balance sheet, the company comes alive in the income statement. For example, PayPal features a three-year revenue growth rate of 18.5%, which ranks better than nearly 79% of firms listed in the credit services industry. In addition, PayPal features a return on equity of 9.78%, far higher than the underlying industry’s median stat of 5.68%.
What is the Fair Price for PayPal Stock?
Turning to Wall Street, PayPal stock has a Strong Buy consensus rating based on 24 Buys, seven Holds, and zero Sells assigned in the past three months. The average PayPal price target is $120.82, implying 42.2% upside potential.
Upwork (UPWK)
Formerly known as Elance-oDesk, Upwork represents a freelancing marketplace. Essentially, Upwork connects some of the best independent talents with companies seeking to fill specific needs. In many ways, the company provides a win-win scenario: enterprises receive the services requested while independent contractors earn a living providing them.
From the spring doldrums of 2020 through the final quarter of 2021, UPWK garnered intense interest among retail investors. Unfortunately for longtime stakeholders, Upwork shares have crashed since October. Indeed, UPWK has lost over 59% of its market value for the year so far, which makes the investment profile admittedly speculative. Nevertheless, gig economy stocks should rise in demand over time, particularly names like Upwork, which directly connect independent contractors to potential paying opportunities.
To be fair, Upwork doesn’t have the strongest metrics when it comes to financial stability. However, it remains an enticing growth opportunity. For example, in its second quarter of 2022, Upwork posted revenue of $156.9 million, representing a year-over-year lift of over 26%. For the funds earmarked for speculation, UPWK could be worth a shot.
Is UPWK a Good Stock to Buy?
Turning to Wall Street, UPWK stock has a Moderate Buy consensus rating based on six Buys, three Holds, and zero Sells assigned in the past three months. The average UPWK price target is $28.11, implying 103.8% upside potential.
Takeaway: Gig Economy Stocks Will Likely Benefit from Human Nature
Although the present standoff between employers and employees regarding the push to the office may seem shocking, in reality, this conflict features a long history. After all, the Cold War has its roots in The Communist Manifesto. Stated differently, workers sometimes take drastic actions against the owners of the means of production. It’s simply human nature. Logically, then, the beauty of gig economy stocks to buy is that they corral this universal sentiment into profitability.
Therefore, the current downturn in the equities sector represents a potential opportunity to acquire these relevant market ideas at a discount.
