Will Upwork Stock Keep Yielding Good Returns?

Upwork stock has risen by over 15% during the trading session today as of 10:05 AM ET. The stock also rose as much as 13% in the pre-market session.

Sophia Nicholson - Author

May 12 2020, Published 11:15 a.m. ET

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Upwork stock has risen by over 15% during the trading session today as of 10:05 AM ET. The stock also rose as much as 13% in the pre-market session as of 8:32 AM ET. Upwork stock gained 6.7% on Monday and closed the trading day at $10.51. At Monday’s closing price, the company’s market value was around $1.2 billion. The stock has recovered significantly from the COVID-19 dent and has almost doubled since March 18. Currently, Upwork stock is trading at a 40.8% discount from the 52-week high of $17.75. The shares are trading at a premium of 104.5% from the 52-week low of $5.14. Can the stock sustain its growth momentum?

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Why is Upwork stock rising?

Upwork is a remote working platform that facilitates freelance work. The company connects companies to freelancers. Upwork focuses on small and medium-sized businesses. The online nature of Upwork’s business works well for the company amid COVID-19. People have to stay home and work remotely during the lockdowns. I think that Upwork should continue to benefit from the current work-from-home trend. Many companies are also looking for remote working options to save on costs.

Like Upwork, Zoom Video Communications (NASDAQ:ZM), which facilitates online business meetings and calls, has also skyrocketed. Walt Disney’s (NYSE:DIS) Disney+ streaming service has gained momentum. People have spent more time watching movies amid the pandemic. Disney+ subscribers reached 54.5 million at the end of May 4—a rise from 33.5 million as of March 28.

Recently, Upwork reported its first-quarter earnings results on May 6. The company’s revenues and margins grew by double-digits amid the coronavirus crisis. The revenues beat analysts’ estimate of $81.1 million and grew 21% YoY (year-over-year) to $83.2 million due to its marketplace and managed services revenues. Upwork’s gross margins also expanded to 72% in the quarter—up from 69% in the same quarter last year. However, a huge rise in operating expenses led to losses in the quarter.

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Upwork’s outlook

Although the company has withdrawn its financial guidance for 2020, it has provided guidance for the second quarter. Upwork expects its second-quarter revenues to grow by $79 million–$81 million in the second quarter.

Wall Street analysts expect Upwork to report sales of $79.8 million in the second quarter. The figure would mark an increase of 7.5% YoY compared to $74.3 million in the second quarter of 2019. Also, analysts expect the company to report an adjusted EPS of -$0.07 in the second quarter. Currently, analysts expect an 11.5% and 13.6% rise in the company’s 2020 and 2021 revenues, respectively. Analysts also expect an adjusted EPS of -$0.25 and -$0.15 in 2020 and 2021, respectively.

Analysts’ recommendations and technical details

Among the seven analysts covering Upwork stock, five recommend a “buy,” while two recommend a “hold.” None of the analysts recommend a “sell.” Analysts have an average target price of $11.29 on Upwork. The target price implies a premium of 7.4% based on the closing price of $10.51 on Monday.

Upwork’s 14-day RSI (relative strength index) score is 75.12. The RSI suggests that the stock is “overbought.” The stock also closed near its upper Bollinger Band level of $10.05, which suggests that it’s near overbought territory.


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