Global freelancing website Upwork Inc UPWK saw its shares soar more than 50 percent after it started trading in early October.
Here's a roundup of what some of the Street's top analysts are saying as its IPO quiet period expires.
- RBC Capital Markets' Mark Mahaney initiated coverage of Upwork with an Outperform rating and $24 price target.
- Jefferies' Brent Thill initiates at Hold, $20 price target.
- Citi's Mark May initiates at Buy, $23 price target.
Shares traded around $18 at time of publication.
Citi: The Freelance Economy
Upwork is a beneficiary of the freelance economy as skilled workers demand more independence, May said. Leading the change towards a freelance economy are millennials who will make up 75 percent of the total workforce by 2025. As such, the company is likely to benefit and should be able to grow its revenue at a 19 percent compounded annual growth rate over the coming five years.
RBC: 5 Positives
Upwork's platform is able to satisfy workers demands for more flexibility and should be bought by investors for five reasons, Mahaney said in a note.
- Ability to target the $560 billion gross services volume total addressable market of which it holds a market share of less than 1 percent.
- The company is the leading online player with 375,000 freelancers and 475,000 clients.
- A reputation of offering a strong value proposition to both clients and freelancers.
- The necessary technology in place to power the robust platform.
- Future potential growth opportunities including category and vertical expansion.
The $24 price target is based on 8 times EV/sales on estimated 2020 revenue of $360 million and a three-year revenue compounded annual growth rate of 20 percent.
Jefferies: Minimal Upside
Upwork shares are up about 25 percent since its IPO, which makes it difficult to make the case for incremental upside, Thill said.
Specifically, the analyst's model assumes a 15 percent revenue growth rate in the next 12 months and 20 percent in the year following. Even assuming a 25 percent and 30 percent growth rate in year one and two and applying an EV/S multiple of 7 (roughly average of SaaS group at 7.7 times and the marketplace at 5.2 times) yields a value of $21 per share.
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