What happened

Shares of work-from-home freelancing company Upwork (NASDAQ:UPWK) were down sharply in early afternoon trading Friday, off 10.6% as of 12:25 p.m. EDT. Given that this is earnings season, you might expect that Upwork missed earnings -- but the opposite is true.  

Analysts expected Upwork to post a loss of $0.05 per share on $74.3 million in sales for its fiscal second quarter 2019. In fact, it hit the sales estimate on the nose -- and either earned $0.01 a share (pro forma), or lost only $0.02 under generally accepted accounting principles (GAAP).  

Red arrow crashing into the floor

Image source: Getty Images.

So what

Whichever number you focus on, Upwork beat analyst expectations soundly in Q2. The question is whether the quarter was good or bad, objectively.

And that's harder to answer. On the one hand, sales for the quarter grew 18% year over year, which is pretty good. On the other, the company's GAAP net loss was twice as bad as last year, and its pro forma EPS of $0.01 was less than the $0.06 the company said it earned a year ago.

Now what

And yet, Upwork sold off. I suspect guidance is the answer.

It didn't provide estimates for what it might earn in Q3 2019, or for the full year. But management did say that it believes Q3 sales will come in somewhere between $77 million and $78 million. Taken at the midpoint of that range, this falls ever so short of the $77.8 million that Wall Street is looking for.

Similarly, by year end, Upwork predicts it will have booked sales of $300 million to $304 million. Street analysts want to see no less than $302.9 million -- so once again, while Upwork is leaving open the possibility it will hit analyst estimates, it might also miss, and the midpoint of its guidance certainly falls short of expectations.

I don't know that such small misses necessitate giving the stock a 10.5% haircut today, but apparently I'm in the minority on that opinion.