Upwork Inc (UPWK)

[JohnCM]

Hang in There, Upwork Investors, Better Days Ahead, Says Analyst

Smarter Analyst
April 3, 2020

The trailing twelve-month chart for freelancing platform Upwork (UPWK) makes for queasy viewing. The stock has declined by 73%, 50% of which were shed since the turn of the year. While the majority of companies’ valuations have tumbled aggressively since the viral outbreak, Upwork’s severe beating is a curious one. You would think as its core business is all conducted online, it would be shielded somewhat.

While Upwork hasn’t been immune to the COVID-19 pandemic, BTIG’s Marvin Fong believes the company's “potential is underappreciated.” Fong puts his money where his mouth is, reiterating a Buy rating, along with a $14 price target. Expect upside of a spectacular 160%, should Fong’s forecast plays out.

Despite the alarming downturn, Fong believes Upwork “has held up reasonably well” and is “doing better than most.” But the contracting global economy has affected activity on the platform. Job listings on March 31 indicated a 12% drop since the start of the month, with the trend remaining negative, both on the domestic and international front.

Although Upwork belongs to the “work-at-home” category, Fong is not surprised to see its business depressed in the near-term. During recessions, the availability of freelancers increases, while jobs become scarcer. The difference this time, though, is that even people in full employment are working from home.

Yet, Fong believes there is a brewing opportunity for Upwork here: “What UPWK has going for it in this environment is the ability to help businesses find low-cost talent and provide rapid hiring in a world where physical interviews and onboarding are undesirable. In the longer run, with more freelancers on the site and businesses of all sizes getting more comfortable with remote workforces, we believe the pandemic could help Upwork’s enterprise offering gain improved traction once things settle down and businesses get out of survival mode.”

Turning to the rest of the Street, Upwork’s Moderate Buy consensus rating breaks down into 4 Buys and 3 Hold ratings. With an average price target of $11, investors could see upside of 84%, should the target be met in the coming months.