Upwork: Substantial Upside Opportunity In Workforce Mobility

Upwork Inc (UPWK)
Talent Sourcing - Freelance Employment

Short Term:BUY
Long Term: ACCUMULATE

First Target:$26.50
Second Target: $30.50
Third Target: $37 

Company Overview:
Virtual labor is the “next big thing” of the mobile economy and Upwork wants to be the de-facto platform. The company operates the largest freelancing website (as measured by Gross Services Volume), enabling businesses and individuals to directly hire, manage and pay for freelance labor. It also enables clients to streamline workflows, such as talent sourcing, outreach and contracting. In addition, its platform provides access to functionality for remote engagements with freelancers, including communication and collaboration in, time tracking and invoicing, and payments via escrow through its wholly owned subsidiary, Upwork Escrow Inc. Clients are able to freelance in various categories such as accounting, business support, I.T. services, personal and virtual assistance, copy edition, SEO, graphic design, web/mobile development and sales. 

The Opportunity:
Traditional methods of sourcing labor are no longer providing the human resources necessary for the fast growing tech sector, especially when labor is tight as it is now. Conversely, when the labor market slows down, many will turn to the freelance market to supplement incomes. Although too early to tell, Upwork is likely to benefit from a slowing economy as long as they are able to keep the quality of service providers up thereby keeping consumers of freelance labor satisfied with the results of their virtual workers. One key strength is the company's emphasis on highly skilled, in-demand professionals who value flexibility and prefer remote work. According to the company's third annual "Future Workforce Report", by 2028, 73% of all teams will have remote workers". More than 1 in 3 Americans will freelance this year as the freelance workforce has grown by 3.7 million to 56.7 million Americans over the past five years. (Perhaps another clue why the unemployment rate remains subdued so late in this economic expansion). According to "Freelancing in America: 2018", Americans are spending more than 1 billion hours per week freelancing, an increase of 72 million hours/week since 2015.

The Benefits:
By tapping into on-demand labor, companies are able to increase productivity by accessing specialized skills while reducing overall labor costs in the face of rapidly changing requirements that need constant re-skilling. At the same time, providers gain the flexibility to embrace an agile workforce and adapt to the future "car less" economy with the obvious benefits this would have on the environment by reducing the world's carbon footprint. 

The Trade:
UPWK is providing a compelling entry point for a long trade with a time horizon of a 6 weeks to 6 months (intermediate term hold).We use a proprietary model developed using supervised machine learning that attempts to predict shifts in sell side analyst behavior. When the model suggests consensus estimates will shift up (or down), we begin tracking analyst estimates and revisions for movement. We then breakdown ownership to understand how much of the tradable float will be affected by the analyst's revisions. The idea behind this strategy is to get in front of a "momentum ignition" in the stock powered by a series of "beat and raise" quarterly numbers, especially with a company showing substantial sequential growth, such as Upworks. 

Additional Data (from Refinitiv):