Upwork stock price target cut to $13 by Roth/MKM after a 'disappointing 2Q'

Published 2024/08/16, 15:46
UPWK
-

On Friday, the price target for Upwork Inc. (NASDAQ: NASDAQ:UPWK) was lowered to $13 from $19 by Roth/MKM, while the firm continued to endorse the stock with a Buy rating. The adjustment follows Upwork's second-quarter earnings, which fell short of expectations, leading to a reduced outlook for 2024 amid increasing macroeconomic challenges identified since mid-May.

The company's second-quarter performance prompted a revision of revenue projections for 2024, which are now 5% lower. However, Upwork has affirmed its EBITDA projections for the same year. The firm noted that despite a decrease in new customer activity, Upwork has seen sustained interest in AI-related projects, its Enterprise services, and Advertising.

Roth/MKM also revised its revenue and EBITDA estimates for 2025, reducing them by 10% and 6%, respectively. At the current share price of $10, Upwork is trading at approximately 9 times its projected 2025 free cash flow. The firm's stance on maintaining a Buy rating hinges on the assumption that the risks for the second half of 2024 have been mitigated and that no additional setbacks will occur.

The analyst from Roth/MKM emphasized that despite the lowered forecasts, Upwork's commitment to its EBITDA outlook for 2024 remains unchanged. The continued traction in key growth areas, such as AI gigs, Enterprise, and Advertising, supports the positive outlook despite recent challenges. The firm's maintained Buy rating reflects a belief in Upwork's potential to navigate the current economic headwinds without further negative impacts on its financial model.

In other recent news, Upwork Inc. reported a year-over-year revenue increase of 15% to $193.1 million for the second quarter of 2024. The company also recorded its highest-ever quarterly GAAP net income at $22.2 million and a robust adjusted EBITDA margin of 21%.

Despite these positive results, Upwork adjusted its full-year revenue guidance downward due to softer client activity and macroeconomic challenges.

Upwork's revenue growth was driven by flat fee pricing, ads, and monetization products. The company saw a 75% YoY revenue growth in ads and monetization products. However, there has been a decline in clients seeking work on the platform, and the enterprise business showed no growth, remaining flat.

Upwork anticipates Q3 revenue to be between $179 million and $184 million, and full-year revenue is expected to range from $735 million to $745 million. The company maintains its adjusted EBITDA forecast for the full year at $140 million to $150 million.

These are the latest developments in the company's financial performance.

InvestingPro Insights

In light of Upwork Inc.'s (NASDAQ: UPWK) recent earnings and the subsequent adjustments to its price target by Roth/MKM, investors may find the real-time data from InvestingPro particularly pertinent. As of the last twelve months leading up to Q2 2024, Upwork boasts a market capitalization of $1.32 billion and an impressive gross profit margin of 76.18%, underscoring its ability to maintain profitability in its operational model. Additionally, the company's revenue growth rate stands at 14.5%, indicating a robust expansion despite economic uncertainties.

InvestingPro Tips highlight that Upwork's management has been proactively engaging in share buybacks, which could signal confidence in the company's value proposition. Moreover, the company holds more cash than debt, providing a cushion against market volatility and potential downturns. It's also worth noting that analysts predict Upwork will be profitable this year, which aligns with the company's own EBITDA projections for 2024.

For investors seeking further insights, InvestingPro offers additional tips on Upwork, including detailed analysis on stock price movements and valuation multiples. With the current share price at $9.99, Upwork is trading below the fair value estimates of analysts ($14) and InvestingPro's own fair value assessment ($11.22), potentially presenting an opportunity for investors considering the company's solid fundamentals and growth prospects.

For those interested in a deeper dive into Upwork's financial health and future outlook, more InvestingPro Tips are available at: https://www.investing.com/pro/UPWK.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.