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Is More Upside In Store for Upwork?
Stock Analysis & Ideas

Is More Upside In Store for Upwork?

Santa Clara, Ca.-based Upwork Inc. (UPWK), which connects millions of businesses with independent talent globally, has skyrocketed around 302% in the past year and is currently trading at over $54.

A strong set of factors that could propel shares even higher includes revenue growth and the incorporation of freelancers into Upwork’s workforces. Additional catalysts could be Upwork’s expansion of its platform’s capabilities, growth of new client acquisition, higher client retention and rising numbers of new Enterprise clients. (See Upwork stock chart on TipRanks)

The Growth Path

In the era of changing work habits due to the pandemic, Upwork has turned out to be triumphant. The company has worked hard to garner the interest of large business enterprises in hiring freelance talent through its Work Together Talent Grants program. The upward curve of the hiring spree of freelance talent by businesses as cost-saving measures has resulted in a strong need for Upwork’s services.

Renamed as Upwork in 2015 from “Elance,” the company upholds the culture of working from anywhere. Upwork CEO Hayden Brown said in a release, “People think freelancing is maybe not a serious career choice, and something they may not be able to do sustainably, which is not true. We’re very focused on trying to pull the covers off of what’s really happening with the freelance economy, educate more businesses about the power and potential of [freelancing], and what they can do with the amazing skilled workers that are available through the platform.”

With varied projects including Project Catalog, Talent Scout, and Enterprise Suite, Upwork focuses on the expansion of its platform’s capabilities to aid businesses in incorporating freelancers into their workforces.

Per a study of the independent workforce in America conducted by the company itself, 59 million Americans worked as freelancers in 2020, up 2 million freelancers since 2019. Furthermore, the study revealed the rising wave of Gen-Z (18-22 years) entering the job market. Brown commented, “The younger generations have seen that employment, the traditional employment contract, isn’t what it was in the past. They want the autonomy to build their careers when, where, and how they can on their terms.”

Notably, Upwork has partnered with Zoom Video Communications (ZM) to integrate its video and voice communication tools with its platform, aiding clients with secure communication for interviews and projects.

Earnings Recap

With an existing gross service volume (GSV) of $1.3 trillion, Upwork reported strong 1Q21 results. Revenue jumped 37% year-over-year to $113.6 million, while marketplace revenue was up 40% to $104.7 million. The company returned to profit in the quarter with $0.03 per share, compared to a loss per share of $0.03 in the prior-year quarter.

New clients grew 55% year-over-year, while SEM-acquired new clients rose 113%.

Upwork’s CFO Jeff McCombs commented during the earnings call,  “We are bullish about the investment opportunities in front of us. And we’ll continue funding growth initiatives while closely monitoring our performance to achieve our return thresholds.”

Analyst Recommendations

On June 15, Stifel Nicolaus analyst Logan Thomas maintained a Buy rating with a price target of $65 (13.5% upside potential) on the stock.

Recently, BTIG analyst Marvin Fong reiterated a Buy rating on the stock but decreased the price target to $65 from $75, reflecting lower tech valuations. In a note to investors, Fong said that the company’s 1Q earnings results were in line with his expectations.

Bloggers Weigh In

TipRanks data shows that financial blogger opinions are 95% Bullish on UPWK, compared to a sector average of 69%.

DisclaimerThe information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

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