The recent strong growth in Upwork Inc’s UPWK market is likely to continue, with a paradigm shift to working with remote teams underway, Stifel said in an upgrade issued after the company's Wednesday third-quarter earnings beat.
The Upwork Analyst: Logan Thomas upgraded Upwork from Hold to Buy and raised the price target from $17 to $31.
The Upwork Thesis: While Upwork’s market has expanded significantly, its revamped management team is focusing on maintaining the company’s leading position and creating high-value solutions for clients, Thomas said in a Thursday upgrade note.
The company’s growth is supported by "more business expenditure for flexible talent solutions, rising acceptance of remote workers, and demand for digital deliverables," the analyst said.
“A broader reexamination of business processes and workforce structures across industries should sustain demand for digital talent and productivity tools well beyond this year, in our view.”
These developments should enable Upwork to generate 20%-plus revenue growth and “fund reinvestment opportunities and expand margins over the next 12 months,” he said.
Thomas said he considers the stock's valuation as “attractive relative to marketplace and SMID-cap enterprise software multiples,” and added that he expects Upwork to “maintain double-digit revenue growth for the foreseeable future with core gross margins of ~78%.”
UPWK Price Action: Upwork shares were rallying by 36.35% to $27.57 at last check Thursday.
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