New Trade for May 6th, 2021

The winds of the gig economy are blowing. Over the past year, many people turned to freelancing to supplement their income as a result of pandemic-related layoffs and furloughs. For Upwork, whose online platform connects businesses with freelancers in 180 countries, user growth has surged.

Looking at the 5 day chart, you may wonder why UPWK shares slid after the company reported better than expected Q1 numbers.  The company reported earnings of $0.03 per share on revenue of $113.6 million topping estimates of a $0.04 per share loss on revenue of $108.9 million.  However, substantial increases in spending on research and development, sales and marketing, and general costs left the company working at an operating loss.  This sent the share price lower, dropping as much as 12% intraday.

It’s worth noting though, that despite the loss, net losses actually decreased by around a third compared to the same period last year, dropping to $0.06 per share.  Other than the operating loss, numbers were positive.  Revenue increased by 37% year over year, with gross sales volume increasing by 41%.  Sales gross profit margins increased by a full percentage point to 73%. 

Even though sales have increased significantly, the business is still not profitable. This alludes to the fact that the gig economy is still in its infancy, and Upwork has chosen to concentrate on growth rather than profit.

In addition to the first-quarter earnings beat, Upwork also forecasted a second-quarter earnings beat, with revenue ranging from $119 million to $121 million, compared to the $114 million analyst forecast.  And for the entire fiscal year 2021, Upwork predicts revenue of $480 million to $490 million, well ahead of the analyst estimate of $467 million.  Assuming revenues grow in accordance with the forecast, investors are likely to see an appreciation in the share price this year.

Given its dominant position in the market, the company stands to gain the most from the gig-economy trend.  The winds of the gig economy are blowing in the company’s favor and explosive returns are anticipated.  

Where to invest $1,000 right now...

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