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Shares of Upwork (Nasdaq: UPWK) are buying and selling 21% increased in pre-market because of fourth quarter earnings that soared previous Wall Avenue expectations. The spotlight? Upwork’s income rebound continues. Gross sales grew 32% from the prior 12 months, the corporate’s highest ever development charge.
Is Upwork’s rebound simply getting began or is it using Covid tailwinds that would quickly fade away? Let’s dig in.
Upwork’s Fourth Quarter Numbers in Element
Digging into the main points on Upwork’s fourth quarter outcomes, the next highlights soar out:
- As talked about above, revenues grew 32% from final 12 months to hit $106.2 million.
- Most significantly, market income (the principle driver of Upwork’s enterprise) grew even sooner at 34%
- The corporate posted a shock revenue of $.9 million. Non-GAAP (or adjusted revenue) was increased at $7.eight million.
- Looking forward to 2021, Upwork projected income within the vary of $460 million to $470 million.
Whereas a shock revenue is good and is additional validation Upwork’s enterprise mannequin may be very worthwhile because it scales… The important thing phrase is scale.
If aspect hustles and contract work — the so-called “gig financial system” — is a development that’s solely starting to speed up, you then need to give attention to the corporate’s income development. Placing Upwork’s fourth quarter into perspective, we see an encouraging development.
Income Progress Quarter
Subsequent 12 months’s steerage factors to 24.5% development over 2020, which might be a deceleration of development from the fourth quarter. However right here’s two issues to contemplate:
- Steering for 2021 got here in above Wall Avenue’s projections. Within the short-run, inventory costs will transfer totally on whether or not firms beat expectations.
- Within the long-run inventory costs will transfer off an organization’s skill to persistently develop income (and in time, earnings). Upwork is projecting to develop 24.5% off a 12 months with a historic tailwind to their enterprise. This illustrates their confidence Covid was much less of a “one-time enhance” and a long-term development that noticed an inflection level in 2020.
Upwork: Purchase or Promote the Inventory?
Upwork’s sturdy outcomes proceed to validate the expansion in freelance work, with main firms and professionals adopting the platform. Nevertheless, is its inventory a purchase in the present day?
The principle hold-up for buyers is probably going valuation. At $60 per share, Upwork trades for about 16 occasions subsequent 12 months’s gross sales. Its most blatant different is Fiverr (NYSE: FIVR), which is rising considerably sooner (gross sales grew 89% final quarter), however at present is simply reserving half the income of Upwork.
Each shares are costly — welcome to the market in 2021 — however in the present day’s earnings from Upwork appear to solely additional validate the most effective play for buyers who consider within the “gig financial system” is to personal each firms. With this being a development that simply noticed lighter fluid poured over its development and can probably proceed increasing throughout the last decade, each firms have highly effective first-mover benefits that will probably be troublesome to displace.