Upwork (NASDAQ: UPWK) Still The Perfect Buy And Hold

Yesterday’s 12% pop means shares of Upwork (NASDAQ: UPWK) are up close to 30% in 2021 already and closing at fresh all time highs. It’s not altogether that surprising of a start for the Santa Clara based company, whose shares managed to rally 700% from March of last year.

The latest move comes off the back of an upgrade to shares from Citigroup, who moved them from Neutral to a Buy rating. In a move that should underpin a fresh rally and get investors, both new and old, excited, they also upped their price target from $32 to $48, a 50% jump that implied upside of around 30% from where they closed last week. Even with yesterday’s jump eating into it already, Upwork stock is only getting more attractive.

Capitalizing On The Shift To Digital

In a note to clients, Citigroup pointed out the massive shift towards digital that’s underway, and freelance work is no different. The working from home boom, brought about by the COVID-19 pandemic, was probably one of the best things that could have happened to Upwork. As one of the biggest online freelance marketplaces out there, Upwork is well positioned to continue capturing market share of a massive total addressable market. They’re making a habit of consistently beating analyst expectations with their quarterly earnings reports,with Citigroup predicting even "better growth in 2021 and beyond" as the company continues to move upmarket and into the enterprise space.

It was reminiscent of Stifel’s comments in the weeks before Christmas, when they also upgraded shares to a Buy rating. They focused on the accelerating adoption of Upwork’s Marketplace platform which should drive 20%+ revenue growth in the next year along with expanding margins. Looking at their track record in recent months, it’s easy to see how this could happen.

In November, year on year revenue growth of 24% meant the company’s Q3 report came in well ahead of the consensus and helped to propel shares up a staggering 45% the following day. While GAAP EPS was just underwater at -$0.02, it also beat expectations. In the two months since, shares have more than doubled as expectations around Upwork’s ability to keep this momentum going into 2021.

Catch-up Play

While the stock of their closest competitor Fiverr (NYSE: FVRR) managed to outperform them in the full twelve months of 2020, rallying 750% to Upwork’s 200%, the latter has owned the most recent quarter. Upwork’s shares are up more than 120% since the days before their November earnings while Fiverr’s are up around half of that. It looks like that earnings report lit a fire under Upwork’s stock and ignited a catch-up play that’s still very much active.

There was some selling in the final week of December but that end of year dip now looks to have been the perfect buying opportunity in hindsight. Shares dropped about 20% but crucially didn’t even come close to testing, let alone breaking, the lows of a dip from the start of the month. This suggests that Wall Street is happy with Upwork’s new normal, and investors have a new level to work off in terms of support. To the upside, keep an eye on the MACD as it’s on the verge of a bullish crossover while the RSI is moving up strongly from the low 40s, both indicators of momentum bubbling away nicely under the share price.

Having only IPO’d in the final quarter of 2018, last year looks to have been the year when Upwork came of age. The freelance industry is going nowhere but up and Upwork have carved out a product that will continue to be the go-to place for anyone offering, or needing, freelance services.