Before the global pandemic, it was referred to as a side hustle—a way for some individuals to make a little extra money. However, as the pandemic has changed the nature of how we work, and as consumers how we spend, the gig economy has become an essential way of life for many workers.
There is much that’s not known about the long-term effects of the pandemic. But if there’s one lesson we learn from history, it’s that there will be ripple effects. We believe that society will get back to something resembling normal. However, what that normal looks like may be different.
Americans were becoming less social since before the pandemic. Now consumers have begun to realize there truly is no reason to leave their house to shop for anything. And while many crave physical connection during these times, there will be many that have changed their purchasing habits for good.
Other elements of the gig economy, such as ride-hailing and home rentals, were devastated due to the pandemic. Those businesses are likely to come back.
And that’s why companies that have created the gig economy aren’t going away anytime soon. In this special report, we’ll highlight several stocks that investors should consider as the gig economy moves forward.
Quick Links
- Airbnb
- Uber
- GrubHub
- Fiverr
- Wix.com
- Etsy
- Target
#1 - Airbnb (NASDAQ:ABNB)
Airbnb (NASDAQ:ABNB) recently went public in one of the year’s most highly-awaited initial public offerings (IPOs). The online vacation rental marketplace was not spared the effects of the global pandemic. However, many investors felt that any disruption would be temporary. And as two vaccine candidates are now in the initial distribution phases, there is increasing hope that a return to travel is actually on the horizon.
When that happens, Airbnb will have an opportunity to put its first-mover advantage to work. The company has identifiable branding and strong gross margins. All it should need is customers to help launch the stock higher.
With all that said, investors should be very careful with ABNB stock as it is currently trading at over $160 per share. While betting against market bulls can be a fool’s errand, this may be a case of a stock soaring too high, too fast. ABNB stock is definitely worth keeping on your watch list and buying when the stock falls to a more appealing level.
About Airbnb
Airbnb, Inc, together with its subsidiaries, operates a platform that enables hosts to offer stays and experiences to guests worldwide. The company's marketplace connects hosts and guests online or through mobile devices to book spaces and experiences. It primarily offers private rooms, primary homes, and vacation homes.
Read More - Current Price
- $134.21
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 19 Hold Ratings, 6 Sell Ratings.
- Consensus Price Target
- $139.48 (3.9% Upside)
#2 - Uber (NYSE:UBER)
Another industry that got destroyed in the pandemic was ride-hailing companies. Uber (NYSE:UBER) was able to find a bit of a lifeline with increased demand for its Uber Eats service. However, UBER stock pushed past its previous 52-week high in November and hasn’t looked back.
The easy answer is that investors anticipate a return to normal. But that’s too simplistic. The real catalyst was the passage of California Proposition 22, which allows Uber and other gig platforms to continue classifying their drivers as independent contractors rather than employees. Drivers will have some limited new benefits, including a pay floor and contributions to health care and accident insurance. However, if the law had passed, it would have fundamentally changed the company’s business model.
Like Airbnb, investors may want to wait for a pullback before jumping on UBER stock. The valuation is starting to look a little stretched, and the consensus of analysts is that the stock is priced just about right at its present level. And remember, Uber is not profitable yet, although earlier this year, the company forecast profitability on an adjusted basis by the end of 2021.
About Uber Technologies
Uber Technologies, Inc develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia excluding China and Southeast Asia. It operates through three segments: Mobility, Delivery, and Freight. The Mobility segment connects consumers with a range of transportation modalities, such as ridesharing, carsharing, micromobility, rentals, public transit, taxis, and other modalities; and offers riders in a variety of vehicle types, as well as financial partnerships products and advertising services.
Read More - Current Price
- $60.73
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 33 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $90.51 (49.0% Upside)
#3 - GrubHub (NYSE:GRUB)
Another service that has surged during the pandemic is food delivery. Grubhub (NYSE:GRUB) was already trading publicly before the onset of the lockdown measures that have closed many restaurants. And the second wave of mitigation efforts that are ongoing in many of the United States is renewing interest in food delivery.
Food delivery was already popular among the millennial and Generation Z consumers that make up a large part of Grubhub’s target market. And it will continue to prosper. Events such as a global pandemic tend to make us more of what we already were.
Investors' question is whether Grubhub’s first mover advantage as a publicly-traded company makes it a better buy to DoorDash (NYSE:DASH), which just went public in December. This is a low-margin business where companies have no distinct moat, which makes me suspect the current valuation of DASH stock.
I’ll give the nod to Grubhub. The company’s stock is trading at a similar price-to-sales ratio during the summer when demand fell as many consumers could eat outdoors at their favorite restaurants.
About Just Eat Takeaway.com
Just Eat Takeaway.com N.V. operates an online food delivery marketplace. The company focuses on connecting consumers and restaurants through its platforms. It serves in the United Kingdom, Germany, Canada, the Netherlands, Australia, Austria, Belgium, Bulgaria, Denmark, France, Ireland, Israel, Italy, Luxembourg, New Zealand, Norway, Poland, Portugal, Romania, Spain, and Switzerland, as well as through partnerships in Colombia and Brazil.
Read More - Current Price
- $61.05
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Fiverr (NYSE:FVRR)
Anytime a stock is up over 800% in a single year, I suppose some caution is warranted. But when I compare Fiverr (NYSE:FVRR) with a competitive offering Upwork (NASDAQ:UPWK), I have to admit. I like Fiverr’s growth to continue for some time.
Millions of Americans have been affected by the pandemic. For individuals with marketable skills in specific areas like computer programming, web development, and software development, a company like Fiverr offers a platform to bid on and get paid to do contract work for many companies who pay a fee to Fiverr to list their jobs.
Yes, the market for this work boomed as many Americans were looking for a source of secondary income (or even primary income) during the pandemic. However, the infrastructure has been in place for some time. One of the fascinating questions that have yet to be answered will be what the future of work will look like. Will working remotely (full or part-time) be a deal-breaker? And your thoughts and analysis on that topic should guide your decision to buy a stock like FVRR.
About Fiverr International
Fiverr International Ltd. operates an online marketplace worldwide. Its platform enables sellers to sell their services and buyers to buy them. The company's platform includes various categories in ten verticals, including graphic and design, digital marketing, writing and translation, video and animation, music and audio, programming and tech, business, data, lifestyle, and photography.
Read More - Current Price
- $32.28
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $32.30 (0.1% Upside)
#5 - Wix.com (NASDAQ:WIX)
Wix.com (NASDAQ:WIX) is a play on the infrastructure that gig workers need. After all, once you decide to shift to remote or freelance work, you have to let people know you’re open for business. For many professionals, getting the word out means having a professional-looking website. That’s where Wix.com comes in.
Even if you’re not a multi-million dollar company, Wix helps you build a site that looks like you do. WIX stock has been trading in a narrow range since surging to its 52-week high in the pandemic aftermath. And the company disappointed investors on the bottom line in its most recent earnings report.
Nevertheless, if you believe in the future of remote work, it’s only a matter of time before WIX stock will power forward. That’s because Wix generates a good portion of its revenue from premium subscribers, and that is a trend that is trending in the right direction.
About Wix.com
Wix.com Ltd., together with its subsidiaries, operates as a cloud-based web development platform for registered users and creators worldwide. The company offers Wix Editor, a drag-and-drop visual development and website editing environment platform; and Wix ADI that enables users to have the freedom of customization that the classic editor offers.
Read More - Current Price
- $221.37
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $210.71 (4.8% Downside)
#6 - Etsy (NASDAQ:ETSY)
Etsy (NASDAQ:ETSY) is one of the purest of pure plays in the gig economy. If you’ve ever created something and been told, “you could sell that,” then Etsy might be for you. And, it appears, that’s exactly what many people started to realize during the pandemic.
Etsy’s been around for about 15 years. But what was a company showing slow, steady growth has seen revenue nearly double during the pandemic. That has helped shoot ETSY stock up over 330% for the year. And quite frankly, it’s looking overvalued at the moment. But that’s OK. The long-term narrative on Etsy is still sound. It’s just a little overheated right now.
As more Americans go back to something resembling a normal routine, it will sift out those on Etsy because of spare time and those trying to build a business. Wait until then and look for a pullback to buy shares of this stock.
About Etsy
Etsy, Inc, together with its subsidiaries, operates two-sided online marketplaces that connect buyers and sellers in the United States, the United Kingdom, Germany, Canada, Australia, and France. Its primary marketplace is Etsy.com that connects artisans and entrepreneurs with various consumers. The company also offers Reverb, a musical instrument marketplace; Depop, a fashion resale marketplace; and Elo7, a Brazil-based marketplace for handmade and unique items.
Read More - Current Price
- $56.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 13 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $63.17 (11.2% Upside)
#7 - Target (NYSE:TGT)
The last stock on our list may confuse you initially, but allow me to explain. Target (NYSE:TGT) is the parent company of Shipt, a membership-based grocery marketplace, enabling delivery of fresh foods and household essentials in 270 cities throughout the United States. Target acquired Shipt in 2017.
Although Shipt does facilitate same-day deliveries for Target customers, it has allowed Shipt to continue operating as an independent subsidiary. As a result, Shipt has acquired many customers since becoming part of Target. This has spread its national reach.
Grocery delivery was considered to be one of the last obstacles for the wide-spread adoption of e-commerce. However, when many Americans were ordered to stay at home as much as possible, Shipt workers became an essential bridge for consumers to get the items they needed in a timely fashion.
Shipt works on a subscription model, meaning customers have to pay a fee to become a Shipt customer. They can either pay a monthly membership of $14 per month or an annual fee of $99 per year. Members get free delivery on any order of $35 or more. Shipt workers are freelancers and can get paid between $16-$22 per hour, plus tips.
About Target
Target Corporation operates as a general merchandise retailer in the United States. The company offers apparel for women, men, boys, girls, toddlers, and infants and newborns, as well as jewelry, accessories, and shoes; and beauty and personal care, baby gear, cleaning, paper products, and pet supplies.
Read More - Current Price
- $131.48
- Consensus Rating
- Hold
- Ratings Breakdown
- 15 Buy Ratings, 16 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $160.57 (22.1% Upside)
Investing in the gig economy is not without risk. Many of these companies are not profitable. And many of them may be years away from profitability if they arrive there at all.
However, major changes frequently happen while investors are looking somewhere else. Many workers have been talking about work-life balance for quite some time. The has given them a chance to prove that this can be a reality. And many employers see the benefits as well.
The world of cubicle farms and corner offices isn’t going away. But for many workers, 2020 has created a new normal that makes it unlikely they will return to anything approaching what used to be considered business as usual.
And that’s why these gig stocks should be part of your new normal as you consider how to position your portfolio for future growth. To be sure, these stocks are speculative and should only merit a small position in your portfolio. But with valuations stretched for many stocks, you could do worse than invest in the gig economy.
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