While few, if any, investors appreciate seeing their portfolios plunge into red amid market volatility, the dip creates countervailing opportunities. Essentially, the upside focuses on purchasing relevant securities at deep discounts. Arguably, gig economy equities represent one of the most attractive sectors to consider. Four tickers – INTU, UPWK, FVRR and ROVR – offer intrepid market participants substantial upside potential.
Let’s configure the broader structure. When the COVID-19 crisis initially turned the global economy around, the workforce was suddenly faced with a prevailing theme: telecommuting or working from home (WFH). Naturally, companies that facilitated remote operations benefited greatly during the initial phase of the new normal.
However, as TipRanks Joey Frenette noted that some of WFH’s biggest bonds lost more than 80% of their book value from peak to trough. However, the argument for gig economy equities is that the underlying companies can pick up where the WFH experts left off. Essentially, the gig economy – an umbrella term to describe how independent contractors make a living – represents a thriving market.
According to data from statist, the projected gross volume of the gig economy is expected to reach $455.2 billion. Furthermore, it is possible that with many employees reluctant to return to the office, subsequent battles between management and workers could result in a larger-than-anticipated expansion of independent contractors. In theory, this should bode well for gig economy stocks.
To be fair, growing concerns about a global recession may quell some worker bee bravado. However, having proven the independence that comes with the temp worker lifestyle, at least some corporate employees will take the plunge.
Anticipating this trend, investors should consider the following gig economy stocks to buy.
While apparently not a big name among gig economy stocks, Intuit, an accounting and business software specialist, is likely to be crucial for new independent hires. Essentially, one of the distinguishing factors between the corporate and gig economy professions is tax filing requirements.
Simply put, employees file W-2 forms with the Internal Revenue Service, while independent contractors file 1099 forms. All other things being equal, W-2s are easy to file as the underlying contracting companies provide relevant tax data to the IRS. On the other hand, 1,099 claimants receive the same tax treatment as companies. Instead of earning a salary, temporary workers generate income, which involves various disclosures and deductions.
Almost immediately, entry-level workers encounter a culture shock over taxation. However, Intuit’s tax software can help alleviate the blow. Having lost about 40% of its market value year-to-date, INTU represents one of the gig economy’s stocks to grab cheaply.
Is INTU’s action a purchase, according to analysts?
Coming back to Wall Street, INTU shares have a strong buy consensus rating based on 17 buys, one hold and zero sell ratings. INTU’s average price target is $539.41, which implies a 28.1% upside potential.
Offering a marketplace for freelancers to find contract assignments, Upwork presents more direct exposure to the stocks of the gig economy. Essentially, the company provides a platform that helps connect professional talent with companies looking to meet a specific need. In this way, companies receive critical services while independent contractors receive payment for the services provided. It’s a win-win.
To be fair, investors should take additional risk if they go ahead with UPWK shares. Fundamentally, the underlying company is primarily geared towards a growth narrative. For example, in the second quarter, Upwork generated revenue of $156.9 million, an increase of more than 26% over the same period last year.
That’s great. However, its net losses continued to expand. Currently, its retained earnings line item is a loss of $300 million. For comparison, in 2016, this metric was a loss of $119.5 million.
Still, with stocks down more than 63% year-to-date and enjoying fundamental relevance, the UPWK is one of the gig economy stocks to be considered by speculators.
Is the UPWK share a buy, according to analysts?
Coming back to Wall Street, UPWK stock has a moderate buy consensus rating based on six buy ratings, three hold ratings, and zero sell ratings. The average UPWK price target is $28.11, which implies a 126.5% upside potential.
For those looking to take even greater risks for possibly greater rewards among gig economy stocks, they should aim for Fiverr. Another market for freelancers, one of the immediate differences between FVRR and UPWK centers on chart performance. The first fell almost 76% year-to-date, reflecting strong volatility.
Just like its direct rival, Fiverr is geared towards growth, only much stronger. For example, the company’s three-year revenue growth rate is 41.1%, ranking better than nearly 86% for the wider interactive media industry. However, it ranks very poorly in terms of profitability. Its net margin is -28.5%, which is worse than nearly 72% of its peers.
Given its proximity to the UPWK, the FVRR poses significant risks. It may be possible for just one to win in this gig economy stock battle. However, if you want to hedge your bets, Fiverr can be intriguing.
Is the FVRR share a buy, according to analysts?
Coming back to Wall Street, FVRR shares have a moderate buy consensus rating based on three buy, two hold, and zero sell ratings. The average FVRR price target is $44.00, which implies a 54.4% upside potential.
One of the most intriguing angles among gig economy stocks to buy, Rover Group also provides a freelancing platform. As with Upwork and Fiverr, the idea here is to connect service providers with service seekers. However, the main difference centers on the purposes. Rather than benefiting business ecosystems, Rover is all about man’s best friend.
From pet sitter, dog boarding and dog walker, among other services, pet owners now enjoy a wide screen to suit their needs. Fundamentally, Rover enjoys two main catalysts. First, the US pet industry represents a huge and still expanding sector. From 2018 to 2021, this segment grew from $90.5 billion in total revenue to $123.6 billion.
Second, if fears of an impending recession cause some employees to capitulate and return to the office, their newfound freedom will evaporate. However, as millennials show a penchant for having pets, many of these returnees are likely to need pet care services. This is where Rover can become exceptionally relevant.
Is ROVR stock a buy, according to analysts?
Coming back to Wall Street, ROVR stocks have a moderate buy consensus rating based on two buys, two holds and zero sell ratings. The average ROVR price target is $5.50, which implies a 34.8% upside potential.
Bottom line: Various Gig Economy actions to suit your style
Even before the COVID-19 crisis, the gig economy represented a viable sub-segment of broader business activities. However, with the post-pandemic new normal, more people are attuned to the lifestyle benefits of temporary workers. Better yet, investors can approach this industry with a variety of options to choose from, from more conservative ideas like INTU to riskier ideas like FVRR.