What happened
Shares of Upwork (UPWK 0.17%) rose by 14.5% in September, according to data provided by S&P Global Market Intelligence. The company's platform connects freelance workers with those who want to hire them, and its stock outperformed both the S&P 500 and the Nasdaq composite average -- the exchange on which it's listed.
That strong monthly performance came despite the fact that there was little news from Upwork. The company gave updated presentations at a couple of investor conferences during the month. Those events were followed by an analyst raising his price target for the stock.
So what
During September, Upwork management presented at Citi's 2020 Global Technology Virtual Conference and at Jefferies Software Virtual Conference. The company's updated investor presentation didn't reveal any game-changing news, though management did discuss its desire to return to a 20% revenue growth rate in the near term. For perspective, quarterly revenue was up 19% year over year in the second quarter.
When Upwork processes a payment or charges a fee, it refers to this flow of money as gross services volume (GSV). In Q2, the company processed $582 million in GSV, but believes the total market size for its services is a whopping $560 billion annually. That gives it enormous potential for growth.
BTIG analyst Marvin Fong agrees that Upwork is poised for growth. According to financial news website The Fly, Fong raised his price target for Upwork stock from $17 per share to $19 per share, citing signs of strong growth in the recently ended third quarter. In short, he believes management's guidance for the period was too conservative given the country's declining unemployment rate.
Image source: Getty Images.
Now what
If Upwork can sustainably increase its growth rate, then at current prices, it could turn out to be a long-term value stock pick. It trades at roughly seven times trailing sales, which looks cheap for a tech stock in today's market. However, its valuation is that low because the business isn't growing like many of its peers.
One would expect Upwork to show solid revenue gains in Q3 considering the country's shift toward greater use of remote workers. But that pattern will need to be sustained over more than just a couple quarters to truly make this a great long-term investment.
