Is Upwork or Fiverr a Better Remote Work Stock Right Now?

With the pandemic came shelter-in-place and mandatory work-from-home, as well as the fastest surge in newly unemployed people in recorded history. It's a terrible situation, both for those affected by COVID-19 directly and the millions suddenly out of a job.

One potentially positive side effect, though, is that remote work and freelancing may have received a permanent shot in the arm. A number of big tech companies -- like Facebook, Twitter, and Shopify -- have announced work-from-home will be a long-term option for employees. And many who have been laid off have turned to the internet to try to leverage their skills and work on more flexible terms. As a result, stock prices for both the leader in the freelancing and remote work industry, Upwork (UPWK +0.54%), and more recent newcomer Fiverr (FVRR 1.93%) are up so far in 2020 -- with the former sporting a 13% gain as of this writing, and the latter a massive 210% run-up.

If you think worker flexibility post-coronavirus is here to stay, it's worth getting familiar with both of these companies. At this juncture, though, one is a better buy.

Image source: Getty Images.

An acceleration in freelance platform revenue

Upwork and Fiverr have a fair amount of overlap in what they do. Both operate platforms in which freelance workers can connect with businesses looking for one-time or ongoing contract work. Categories on both sites span web and software development, marketing, and creative work, to name a few.

Upwork is the long-established leader in the remote and contract workspace, getting its start during the dot.com era. It's the product of a merger between Elance and oDesk in 2013. Thus, it is far larger -- but also much slower-growing -- than Fiverr, which was founded in 2010 and has been quickly catching up as it adds new worker categories to its platform.

YOY = year over year. Data source: Upwork and Fiverr.  

Neither company reports net income, but on a free cash flow basis (revenue less cash operating and capital expenses), Upwork is in positive territory. Upwork has reported positive $13.6 million in free cash flow over the last trailing 12 months, compared to negative $10.5 million at Fiverr. Both have solid liquidity on their balance sheets as well. Upwork reported $145 million in cash and marketable securities and $31.4 million in debt at the end of March 2020, compared to $125 million in cash and marketable securities and $4.42 million in debt at Fiverr.

Two very different valuations

Thanks to its massive surge this year, Fiverr currently trades for 16.2 times trailing 12-month sales. Upwork, on the other hand, has a price tag of just 4.2 times trailing 12-month sales. Granted, Fiverr deserves the premium. It has been growing at a faster rate than Upwork and forecasts that trend to continue. Second-quarter 2020 guidance at Fiverr is calling for a 39% increase in revenue over a year ago at the midpoint of expectations, compared with just an 8% increase at Upwork. Additionally, Upwork withdrew full-year guidance given the uncertainty of the current economic crisis, while Fiverr upped its outlook and sees a 37% full-year increase in its revenue.

A few months ago, I called Upwork stock a value as it appeared too cheap to ignore. The stock has since doubled in value from that point. I still see further upside from here, especially if the company can best its forecast in the quarters that lie ahead as the world adjusts to the new reality post-coronavirus. 

However, at this juncture, shares of Upwork may look like a better value. But Fiverr has offered more visibility on its business, and as a result, the premium price tag is commensurate with the extra growth it sees this year. It is thus also fairly priced. But with more liquidity on the balance sheet and momentum on its side as the far smaller cloud-based remote work platform, it's Fiverr that looks like the better buy at the moment.