Please ensure Javascript is enabled for purposes of website accessibility

Why Upwork Stock Dropped After Earnings

By Rich Smith - May 5, 2021 at 11:24AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company beat on earnings, but lost in early Wednesday trading.

What happened

Shares of Upwork (UPWK 0.05%) were down a discouraging 12% at 11:50 a.m. EDT today, despite the freelance-jobs marketplace reporting better-than-expected sales and earnings in its first-quarter 2021 financial report, released last night.

Analysts had forecast that Upwork would lose $0.04 per share, pro forma, on $108.9 million in revenue for its first fiscal quarter of 2021. Instead, Upwork reported a surprise $0.03 per share profit, pro forma, and sales of $113.6 million.  

Cartoon characters confused by stock chart arrow falling and crashing into floor

Image source: Getty Images.

So what

Upwork's sales grew 37% year over year, with gross sales volume (the amount of work billed by freelancers, through Upwork, to the employers who hired them) rising 41%. Gross profit margins on Upwork's revenue inched up 1 full percentage point to 73%. But significantly higher spending on research and development (up 38%), sales and marketing (up 29%), and general and administrative costs (up 32%) left the company still working at an operating loss.  

Nevertheless, net losses shrank by about one-third in comparison to last year's first quarter -- falling to $0.06 per share, when calculated according to generally accepted accounting principles (GAAP). That number, like the pro forma number, was apparently better than expected.

Now what

There doesn't seem to be a great reason for investors' disappointment (other than the fact that Upwork is still losing money). In addition to the first-quarter earnings beat, Upwork went on to predict another beat in the second quarter, with sales ranging from $119 million to $121 million, versus the $114 million analyst forecast. And for the whole of fiscal 2021, Upwork says you can expect to see sales between $480 million and $490 million, well ahead of the $467 million analyst consensus.

No prediction on GAAP earnings, but if Upwork beats on sales as it's promising to, it stands to reason that its earnings will turn out pretty well, too.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Upwork. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Upwork Inc. Stock Quote
Upwork Inc.
UPWK
$18.56 (0.05%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.