Upwork ( NASDAQ: UPWK ) shares slipped double-digit despite Q2 earnings beat as guidance reflects some of the softening that weigh on Q2, with respect to client acquisition and client retention primarily related to SMB and in Europe.
This in turn will built pressure in terms of the overall growth of active clients.
Shares are currently trading at $19.69, down 14.91%.
Q3 revenue to be between $156M to $158M vs. consensus of $157.55M and adjusted EPS of $(0.06) to $(0.08) vs. consensus of -$0.21.
FY2022 revenue to be between $612M to $617M vs. consensus of $615.44M and adjusted EPS of $(0.15) to $(0.17) vs. consensus of -$0.79.
CEO comment: "Overall, we estimate that the loss of revenue directly attributable to the war was approximately $4 million in the second quarter, and we expect the impacts to revenue in each subsequent quarter of 2022 will be slightly less than the impact seen in the second quarter. As we look to the future, Upwork alongside our customers, partners and investors faces macroeconomic conditions that are difficult to predict. While there are risks that a slowing economy puts downward pressure on some parts of our business, we also see this as a catalytic moment for leaders to reevaluate the old ways of working and operating as well as to widen their consideration of more innovative solutions and for Upwork to capture a greater share of the market."
Analysts are positive on the stock after it topped consensus in Q2. Let's have a look at their comments:
- A Stifel analyst maintained a Hold rating and increased the firm's price target to $23 from $20 per share.In a note to clients, the analyst said, "Upwork reported solid 2Q results in a tough operating environment with revenue and adj. EBITDA above expectations. The company is not seeing a material change in client behavior as a result of the macro environment, though the company did factor in a $10-$15mm headwind to its improved FY 2022 revenue guidance due to the emergence of some seasonality/macro-driven softness in 2Q (in Europe and from SMBs)," added the analyst.
- An RBC Capital analyst maintained a Sector Perform rating and a $21 per share price target on the stock. "The LT opportunity for growth remains robust in digital talent/freelancing, however, we need line of sight to an inflection to growth, more confidence in margin expansion and more comfort in LinkedIn's competitive shadow growing smaller not larger before we get constructive," said the analyst.
- A Jefferies analyst maintained a Hold rating on Upwork but raised the firm's price target to $23 from $20. "UPWK continues to manage top-line expectations well and beat Q2 revs by 6%, plus raised FY22 guide by $14.5M (3%) at mid-pt despite embedding $10-15M in 2H macro impact," said the analyst. "There were some early macro pressures on client acquisition & retention, espec. in Europe and from SMBs. FY22 EBITDA guide was reinstated at minus $10-14M vs. St. - $9M and pre-war initial guide of break-even. Client behavior is unclear if macro worsens, though LT secular trends remain positive."
- Goldman Sachs analyst Eric reiterated a Buy rating and lowered their price target from $31 to $30. "Upwork's Q2'22 earnings report struck a broadly constructive tone on the end demand environment (especially against broader macro fears & uncertainty) with pockets of weakness in certain geos/customer profiles more than offset by strength in other areas (Enterprise, product innovation, etc.)," said the analyst.
- Piper Sandler maintained an overweight on the stock with a price target of $30. The results are strong, and “management continues to navigate the Russia/Ukraine crisis and the macro very well, as the company was able to increase 2022 revenue guidance despite these moving pieces”. The report shows ongoing momentum, “and we are confident in management’s ability to execute over the next several quarters”
- MKM Partners keeps a buy rating on UPWK and raised the price target to $31 from $28. The outlook is “a sign of marketplace demand confidence despite macro weakness” The firm recommends buying on weakness, as the stock is “trading at a clear discount to pre- COVID multiples while the fundamentals, execution, and market opportunity all have trended in the right direction in a post- COVID world”
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Upwork stock plunges despite Q2 beat on ambiguous outlook