Upwork (NASDAQ: UPWK) Stock is an Overlooked Pandemic Play

Online freelance marketplace platform operator Upwork. Inc. NASDAQ: UPWK shares seem to have been overlooked throughout the COVID-19 pandemic despite favorable conditions stemming from stay-in-shelter mandates. Shares collapsed with the  S&P 500 index NYSEARCA: SPY in February 2020 during the pandemic panic and managed to recover to year-to-date highs gaining momentum on the monthly market structure low (MSL) trigger above $14.20. Shares still trade well below its $23 IPO opening price from 2018. The threat of a second wave COVID-19 spread can further drive top-line growth as the restart narrative stalls out. The remote work platform is ideally suited to accommodate the legions of new freelancers working from home due to isolation mandates. Risk tolerant investors may get another chance at opportunistic pullback levels which could develop on a daily cup and handle breakout.     

Q1 2020 Earnings Release

On May 6, 2020, Upwork released Q1 2020 results for the quarter ending in March 31, 2020. The Company reported a non-GAPP loss of (-$0.03) per share versus consensus analyst estimates for a loss of (-$0.02) per share, a (-$0.01) miss. Revenues grew to $83.2 million, up 21% year-over-year (YoY) and gross margins expanded 300 basis points to 72%. The Company moderately cut Q2 2020 forecasts to $79 million to $81 million versus $81.17 million consensus analyst forecasts and pulled full-year 2020 estimates due to pandemic uncertainty. This could be an effort to low ball expectations heading into the Q2 2020 release on Aug. 5, 2020. Consensus estimates are for a loss of (-$0.05) per share. Shares accelerated a rally despite the Q1 2020 top and bottom-line miss.

COVID-19 Pandemic Effects

The pandemic started to affect Upwork starting the second week of March 2020 with the initial deceleration of work projects from clients due to shelter-in-place mandate acclimation. By the last week in March, activity started to rebound week-after-week to “surpass pre-crisis levels on numerous client activity metrics” as momentum continued to accelerate. New client registrations and job posts broke all records in the last week of April as companies migrate from the triage phase to the transition phase as they seek out different ways to get work done. This is a boon to Upwork.

Shifting Landscape of Remote Work

In the earnings conference call, management noted “a recent Gartner CFO study that found 74% of companies plan to permanently shift to more remote work after the current crisis passes.” They also pointed out a Citrix poll indicating that 28% of workers plan to pursue a job that lets them work remotely after the crisis passes. During the crisis, the Company saw ‘unprecedented influxes of new talent” to their platform bolstering the supply side of the equation. On the demand side, the Company has also seen an influx of larger clients for “large, project-based work”. Upwork also saw their clients actually move their non-Upwork contractors to the platform to take advantage of the global payroll and work protection products which ensure compliance in 160 countries. The Upwork platform accommodates the needs for unified billing with enhanced visibility and reporting and worker classification peace of mind.

UPWK Opportunistic Price Levels

Using the rifle charts on weekly and daily time frames provides a broader view of the landscape for UPWK stock. The weekly MSL triggered above $7.70 as the bullish stochastic mini pup oscillation drove shares up to initially reject off the monthly MSL trigger at $14.20. This caused a pullback to the $11.24 Fibonacci (fib) level. The daily stochastic formed stairstep mini pups on an extended consolidation at the $12.21 fib level for nearly a month before finally triggering a breakout to retest and trigger the monthly MSL above $14.20. Both the weekly and daily stochastic are in overbought levels near the 90-band. The daily upside breakout trajectory is the $14.91 fib to $15.08 before a cup-and-handle type reversion pullback. This is where traders and investors should watch for opportunistic pullback levels at $13.16 weekly 5-period moving average (MA), $12.21 fib and $10.74 gap fill/fib. The Q1 2020 conference call gave insights into how fast business accelerated after the end of Q1, so a share price acceleration is possible heading into the August Q2 2020 earnings despite the moderate top line low ball attempt. The weekly upper Bollinger Bands (BBs) project upside targets towards the $17.58 fib and sticky 5’s zone. Nimble traders can trade the price action off the minor fibs and investors can scale in pullbacks with pyramid style sizing at the pullbacks levels (light to heavier dollar-cost averaging as price falls).