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 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?

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.

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Although the company has withdrawn its financial guidance for 2020, it has provided guidance for the second quarter.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.