Upwork (NASDAQ: UPWK) Gets Ready For A Fresh Rally

Despite raising plenty of fanfare prior to its IPO in October 2018, shares of Upwork (NASDAQ: UPWK) were effectively carried into 2020 on a stretcher. The online marketplace for freelancers had never closed above where it started trading on its first-day public and was not only down more than 50% from that price at the start of January, but also at all-time lows.

Some big changes in top management saw CEO Stephane Kasriel departing around that time and Wall Street wasn’t slow about slashing targets and ratings for the stock. On top of that, there were concerns about falling gross services volume and growing regulatory risks. Even the company’s push to break into the enterprise space was seen as a headwind considering those stretched-out sales cycles would take longer to be reflected in revenue. In early February, Upwork reported earnings that were broadly in line with expectations but that had EPS in the red and revenue only up 20% on the year. Then came COVID.

5x Jump In Shares

Suffice to say that shares found themselves down a full 75% from their starting price by the end of March but here the bad news ended. A new chapter began in April as Wall Street saw how well the company was positioned to make the most of the change to a remote working economy with a rapidly growing freelance industry. Shares haven’t looked back since.

As of last night’s close they’re up 500% and aren’t even starting to look overbought. For those of us starting to think about how we want our 2021 portfolio to look, there’s every reason to keep Upwork in mind when allocating some capital to the post-COVID space.

The company reported fresh earnings last month that smashed expectations and made many of the sell-side firms on Wall Street reconsider their previously bearish sentiments. EPS swung from a negative print before COVID to being undoubtedly positive as record numbers of customers signed up. Adjusted EBITDA more than tripled and management saw fit to give forward guidance for Q4 and the full year which was higher than consensus. Shares understandably jumped 50% the next day. Was this really the same company that seemed destined to trade below $5 in March?

Perfect Storm Set To Continue

Stifel followed the release with an almost immediate upgrade, setting expectations for revenue growth numbers to continue at well above 20% for the foreseeable future as the gig economy hits metrics that many thought would take years to achieve. Even with the prospect of a widely available vaccine around the corner, it’s unlikely that we’ll see a return to pre-COVID working practices for some time, if ever. Many companies have already announced that they intend to remain 100% remote-based.

On top of that, those workers in the service and other hard-hit industries who’ve been laid off have been able to kick-start freelance careers on Upwork that they’ll probably always be working on. This pandemic has really been the kind of perfect storm of factors that Upwork needed but few, if any, could have predicted would come around.

Looking ahead through the rest of the month, shares have recently cooled slightly from the all time highs they set two weeks ago but are starting to rev up again having consolidated along the $32 level. They previously topped out at $36 which will be the first target to aim for as part of a fresh move north. We’ve seen how quickly the stock can go once it gets a bit of momentum behind it and all the signs point to 2021 continuing to provide that which 2020 started.