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Why Upwork Stock Finished 2021 Down 1%

By Jeremy Bowman – Jan 11, 2022 at 12:06AM

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Though it was outpacing the S&P 500 for most of the year, a late crash spoiled the party.

What happened

Shares of Upwork (UPWK 1.64%), the online freelancer marketplace, finished 2021 in slightly negative territory, finishing down 1% according to data from S&P Global Market Intelligence

As you can see from the chart below, the market rotation out of growth stocks toward the end of the year dashed what had been a strong performance.

UPWK Chart

UPWK data by YCharts

So what

Like a number of other growth stocks, Upwork came into 2021 on a hot streak. The stock surged in the latter months of 2020, benefiting from a strong earnings report and a boost in demand from the remote work trend and labor displacement from the pandemic.

The stock jumped 20% in January on little news and surged through most of February in anticipation of its fourth-quarter earnings report. Revenue rose 32% in the quarter to $106.2 million, easily beating estimates of $97.2 million, and adjusted earnings per share doubled from $0.03 to $0.06, much better than the consensus of a loss of $0.05, as management touted the tailwinds from remote work.

Two people shaking hands across a table.

Image source: Getty Images.

Guidance was also better than expected, and the stock briefly jumped 20% on the report before giving up much of those gains by the end of the session. Shifting market sentiment away from pandemic winners seemed to play a role in that, and the stock drifted downward following the report. 

It remained volatile for the next two months before falling lower on its first-quarter earnings report despite beating estimates once again. Revenue jumped 37% to $113.2 million, and the company posted earnings per share (EPS) of $0.03, which compared to analyst estimates of $108.7 million in revenue and a loss of $0.04 per share.

The stock bounced higher in June before again diving on its second-quarter earnings report at the end of July as investors seemed to think the stock price growth was outrunning that of the business. Revenue growth accelerated to 42% and the company posted a surprise profit, but the stock still fell 10% on the news.

Shares recovered from that sell-off and gained over the next couple of months with the help of some analyst upgrades. Finally, the stock fell again on its third-quarter earnings report as revenue growth slowed to 32% to $128 million, though that still beat analyst estimates. The stock then fell over the rest of the year in line with a sell-off in unprofitable tech stocks.

Now what

Upwork has continued to slump into the new year, with the stock down 15% through Jan. 10 as the market is rotating out of high-priced growth stocks. However, Upwork's valuation now seems a lot more reasonable at a price-to-sales ratio around 8 than it did at its peak last year when it was double what it is now.

2022 will present a different set of challenges; the company will have more difficult comparisons, but the remote work trend still favors it.

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

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