On Thursday, Piper Sandler adjusted its outlook on Upwork Inc. (NASDAQ: NASDAQ:UPWK), reducing the price target to $13 from the previous $20, while still maintaining an Overweight rating on the stock.
The adjustment follows Upwork's announcement that it has decreased its full-year revenue forecast by about 5% due to macroeconomic challenges. The company observed a decline in early-stage funnel activity beginning in May, which has persisted into July.
The revised forecast is based on the assumption that there will be no improvement in the latter half of the year.
Upwork has reported that the reduced demand from larger organizations has led to a decrease in Gross Services Volume (GSV) per client. Despite the downward revision in revenue expectations, the company has affirmed its adjusted EBITDA outlook for the year, citing continued cost management efforts.
Management has indicated that the revised outlook for the second half of the year has been de-risked, with the anticipation that fourth-quarter revenue will decline compared to the previous year.
The company's updated guidance has set the expectation that there will be no further disruptions in the second half of the year. Piper Sandler's reiteration of the Overweight rating suggests a continued positive view of Upwork's stock, despite the necessity to adjust the price target due to the recent developments in the company's financial outlook.
The lowered price target reflects the short-term challenges faced by Upwork, while the retained Overweight rating indicates a belief in the company's longer-term potential.
Upwork reported a 19% year-over-year increase in revenue for the first quarter of 2024, reaching $190.9 million, and an adjusted EBITDA of $33.3 million. Despite this positive performance, Needham maintained its Buy rating on Upwork but lowered the price target to $14.00, citing weaker-than-expected customer acquisition and reduced Gross Services Volume (GSV) forecasts.
UBS initiated coverage on Upwork with a Neutral rating and a price target of $12.00, acknowledging improvements in take rates and margin expansion, despite a flat GSV due to macroeconomic challenges. Meanwhile, Piper Sandler maintained a $20.00 price target, expressing optimism about Upwork's focus on artificial intelligence and the early impact of Uma, Upwork's AI engine.
InvestingPro Insights
As Upwork Inc. navigates through its current financial adjustments, real-time data from InvestingPro provides a deeper look into the company's market position. With a market capitalization of $1.26 billion and a P/E ratio standing at 29.75, Upwork is trading at a valuation that investors might consider in light of its near-term earnings growth. The company's gross profit margins remain robust at 75.78%, reflecting its ability to retain a substantial portion of its revenue as gross profit over the last twelve months as of Q1 2024.
InvestingPro Tips highlight some of Upwork’s strategic financial moves, including aggressive share buybacks and maintaining a cash position that exceeds its debt. These insights suggest a proactive management approach to capital allocation and financial stability. Additionally, analysts predict Upwork will be profitable this year, which could be an encouraging sign for investors considering the stock's recent price movement, which has seen a significant decline over the last six months.
For those interested in a more comprehensive analysis, InvestingPro offers additional tips on Upwork, providing valuable insights for a well-rounded investment decision. There are currently 13 more InvestingPro Tips available, which delve into various aspects of Upwork's financial health and market performance.
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