- Upwork’s stock increased by 8% following the 1Q24 results, driven by raised adjusted EBITDA forecasts for FY24 and revenue and profitability exceeding expectations.
- A new pricing structure, significant growth in ad and monetization offerings, steady recovery in active client base growth and increased operating efficiency contributed to its 1Q24 outperformance.
- This quarter marks Upwork’s 3rd consecutive quarter of profitability.
- Trading at a reasonable EV/sales ratio of 2.2x when compared to other similar marketplace businesses and peers.
- Revised rating from “hold” to “buy” based on demonstrated growth and profitability.
Investment Thesis
I covered Upwork (NASDAQ:UPWK) back in March 2024, and since then, the stock has climbed by 8%. Before I dive into its earnings, let me quickly lay out my main investment thesis, and that is whether Upwork has shown clear signs of re-accelerating its growth while maintaining (or improving) profitability.
The rise in share price can be attributed to 2 factors – (1) management raising its adjusted EBITDA outlook for FY24, and (2) the company exceeding its estimates for both revenue and profitability in 1Q24. The main driver of its 1Q24 results was Upwork’s successful transition to a flat-fee pricing model which bolstered its marketplace take-rates and thus marketplace revenue, the strong growth from its ad and monetization products, and also its steady recovery in growth of active client base since 3Q23. Upwork progress indicates that it is on the right track of re-accelerating its growth rates and delivering profitable growth. Moreover, when compared to other marketplace businesses, UPWK seemed to be trading at a reasonable valuation.
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