The job market is changing. Many of us know about the labour shortage. Professionals are choosing to work less than 12-hour days and earn lucrative salaries.

Before COVID-19, the job market was already changing. As industries become more niche, corporations have been gradually reducing their workforce. Companies these days tend to outsource much of their tasks to contractors/freelancers with a specific set of skills.

Data provided by the Freelancers Union consolidates the argument; the Union predicts that 50.9% of the U.S. job market will be freelance workers by the year 2027.

The changing labor market presents opportunities for intermediaries such as Fiverr (FVRR) and Upwork (NASDAQ:) to scale their companies. Both stocks have my support.

Fiverr

Fiverr is a worldwide marketplace. It allows service providers to offer their services to buyers willing to pay agreed upon prices.

Fiverr beat its Q2 revenue estimates after posting $75.3 million in revenue, which is a 59.7% year-over-year improvement. The active users increased 43% and spend per buyer increased 23% respectively. In addition, the take rate was higher by 80 basis points.

Key financial metrics indicate that the stock is on a good wicket. The company’s working capital and levered free cashflow have both increased in the past year to beat industry benchmarks.

Analysts expect EPS to increase 143.8% by December 2023, conveying optimism regarding the shareholder value trajectory.

Wall Street continues to be optimistic about the stock and has given four Buy ratings. FVRR average target price of $220.50 indicates 5.9% upside potential.

Upwork

Upwork is similar to Fiverr, but is considered to be geared towards professionals who are qualified for larger tasks with longer durations, whereas Fiverr outsources smaller and more manageable tasks.

Bernie McTernan from Needham recently raised Upwork’s rating to Buy and set a price target of $57. McTernan stated that the stock has attractive risk-reward characteristics due to its “optimizing SEO/SEO in 19”, a sales force realignment to be more enterprise focused in 20, as well as adding new products such the Project Catalog launch in 1Q21.

Upwork posted second-quarter revenue of $124.2 million, which is a 41.9% year-over-year improvement. New guidance for Q3 has been issued. The revenue estimate is expected to range between $125 million-$127 million, up from the $124.5 million previously estimated. It is expected that adjusted EBITDA will range between $4 million to $5 million.

Wall Street believes the stock is a strong buy, and has set a $67.50 average price target based on four consensus Buys. The average UPWK target price is $67.50, which represents a 31.5% upside possibility.

Final Word

The industry’s growth will support both these stocks, as they’ve established themselves as key players early on.

Their cash decisions will determine their future success.

Disclosure: Steve Gray Booyens held a position in FVRR at the time this article was published.

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