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Upwork Initiated Buy at Bank of America on Fundamentals

'We see Upwork well-positioned to benefit from the shift to a freelance workforce,' Bank of America says. The stock is higher.
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Upwork  (UPWK) - Get Upwork, Inc. Report shares rose Friday after Bank of America initiated coverage of the San Francisco freelance platform with a buy rating and $65 price target.

“We see Upwork well-positioned to benefit from the shift to a freelance workforce and [well-positioned to benefit from] a gain of share in a massive $1.3 trillion total addressable market,” said Bank of America analyst Nat Schindler.

Upwork is poised for “strong revenue growth, a predictable revenue base, enterprise growth, international expansion and new products that will drive the stock [higher].”

The $65 target is based on based on a 2023 estimated enterprise value-to-revenue multiple of 11 times.

The stock recently traded at $47.14, up 4.7%. It has fallen 19% over the past three months.

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“Upwork's platform is one of the largest online marketplaces for freelancers, with over $2.5 billion in gross sales value and users from 180 countries,” Schindler said.

“We believe the pandemic has accelerated the ongoing shift to a remote/freelance workforce. As freelancing becomes an increasingly larger portion of the overall workforce, we see Upwork well-positioned to benefit.”

Further, “Upwork has driven significant recurring revenue streams from past cohorts,” Schindler said.

“We see a predictable and growing revenue model going forward, with growth levers such as upmarket initiatives, international expansion, new products and long-term margin expansion.”

To be sure, risks include “limited take rate expansion near-term as Upwork increases efforts to drive [gross sales value] growth and keeps take rates competitive,” Schindler said.

Also: “[T]ransactions might veer off-platform, especially repeat and high-value projects where clients have established working relationships with freelancers.”