Freelancers account for 36% of the American workforce, according to a recent study by Edelman Intelligence. Freelancers are also referred to as consultants or contractors. Some do it on the side while also employed at a full-time job, others freelance as their full-time job, and some freelancers only work part-time. McKinsey, a U.S.-based consulting firm, projects that 50% of the American workforce will be freelance by 2027. Freelancers who have in-demand skills like data analytics, machine learning, and programming can charge high rates and have flexibility, which will increase the demand for gig economy marketplaces. A sweet spot in the gig economy is to act as a matchmaker, connecting freelancers to clients looking for temporary or permanent assistance with projects. The main freelance work platforms in this space are Upwork ( NASDAQ:UPWK ) and Fiverr ( NYSE:FVRR ). Both of these tech stocks are trading at lower prices from their 52-week highs, are small-cap growth companies, and have minimal debt. Investors seeking exposure to the gig economy should consider buying these today. Image Source: Getty Images 1. Upwork Upwork is the largest freelance marketplace site and companies can find contractors from around the world who specialize in writing, video editing, web design, digital marketing, and more. It was originally founded as Elance in 1999 and merged with competitor, O-desk, in 2013. In 2015, this merged company was rebranded as Upwork and it IPO’d on Oct. 3. 2018. It also has over 12 million registered freelancers and 5 million clients, which could grow over time with the expansion of the freelance economy. This site has many sources of revenue, including charging a percentage of freelancers’ earnings, requiring freelancers to purchase “connects” to apply for jobs, and assessing administration fees on clients. Clients can choose to pay either 2.75% of their client spend or a flat fee of $25 per month for unlimited payment transactions. Upwork has an enterprise selection for large companies that includes additional upgrades like compliance offerings, custom reporting, exclusive access to top freelancers for a monthly or annual fee. The stock is trading around $10, which is toward the 52-week low of approximately $9. It has a positive free cash flow of $7.07 million, but it hasn’t turned a profit yet. Negative earnings is common for smaller cap stocks that have recently IPO’d. However, Upwork has manageable debt with a low debt-to-equity ratio of 0.05, significant cash reserves of $131.56 million, and annual revenue that has grown over 76% from $164.45 million in 2016 to $289.31 million in 2019. Investors may be tempted to buy Upwork when evaluating its revenue growth, profitability, the rise of freelance workers, and debt management. But they should also consider the risk of investing in recently IPO’d firms with negative profitability and that Upwork’s CEO Stephane Kasriel is stepping down. Hayden Brown, chief marketing and product officer, will take his place and there was no reason given for this change. Despite changes in leadership, investors looking to add growth stocks to their […]
