Over the past few years we’ve watched the sharing economy go from individuals looking to profit from their unused assets to a booming economy that has sucked in a huge proportion of the working public. Not only has the sharing economy grown in size, it’s also shifted in character.
Alexandrea Ravenelle, an assistant professor in Sociology at the University of North Carolina at Chapel Hill and the author of Hustle and Gig: Struggling and Surviving in the Sharing Economy, says the past five years have changed the sharing economy dramatically.
We’ve also seen a transition from a focus on sharing or low-cost access to a move to on-demand services, where the platform becomes a profit-seeking middleman. As a result, the sharing economy has essentially been replaced with the gig economy. It’s not surprising to see large corporations enter the ‘sharing sphere,’ especially if there’s way to save money by making workers into independent contractors who have little by way of workplace protections and who face extensive risks, including financial, physical, sexual and even criminal risks.
The introduction of these “profit-seeking middlemen” have given investors a way to invest in the ever-expanding gig economy, but so far those investments have been pretty poor. However, in recent weeks sentiment for the group has started to pick up as investors look for value plays. Here’s a look at four beaten down gig economy stocks to consider.
Uber (NYSE:UBER) is arguably the most recognizable of the gig economy stocks. The rideshare firm was one of the first companies to draw investors’ attention to the potential the industry holds. Although its IPO in May was a media spectacle, the firm has been struggling to regain momentum over the past three months.
Sentiment on UBER stock has dropped dramatically in recent weeks as lawmakers look for way to regulate the business in order to protect gig workers. Uber’s drivers lack what many say are essential benefits because they’re classified as contract workers rather than full-time employees, a fact that California lawmakers say they’re planning to change in the coming year.
Uber’s beaten down stock price could be a potential entry point for investors willing to take on a great deal of risk, though. Earlier this month, Citigroup upgraded Uber stock to “buy,” saying that investors would likely return to the stock following its quarterly results in November. However, it’s worth noting that UBER shares could have further to fall before a recovery sets in—the company’s lockup period also expires at the beginning of November.
Lyft (NASDAQ:LYFT) is Uber’s competition in the ridesharing space, and the firm’s track record on Wall Street has been just as disappointing. Since its IPO in March, LYFT stock has lost more than half of its value, though the stock has started to recover since posting better-than-expected Q3 results.
A big reason for that is the uncertainty regarding gig economy regulation in 2020. Lawmakers in California passed a bill making it more difficult for firms like Lyft to classify their employees as contractors. While the new regulations would only apply in California, they have the potential to set a precedent across the country.
Lyft is also struggling to turn a profit, another factor that investors haven’t been willing to put up with. However, an interview with the Wall Street Journal revealed that Lyft’s management team is expecting the firm to become profitable earlier than expected. That gave LYFT stock a 6.5% boost on Tuesday, and prompted many to increase their expectations for the stock.
Handmade goods marketplace Etsy (NASDAQ:ETSY) is another gig economy stock whose share price has taken a beating in recent weeks. The firm’s Q3 results disappointed when its EPS declined significantly from the year-ago quarter and margins shrunk. However, revenue increased and management upped its full-year guidance, signaling confidence about the holiday quarter. ETSY stock lost 10% following the results.
Of all the gig economy stocks on this list, Etsy has been on Wall Street the longest. The past three months have been disappointing for investors, but Nomura’s Mark Kelley says the stock is a “buy” now that its “messy quarter” is over.
Etsy’s business has proven to have staying power as its loyal community of artists and buyers continues to support the firm’s business model. Many are betting that Etsy will continue to shine as younger generations weigh quality over quantity moving forward.
Fiverr (NYSE:FVRR) is the latest gig economy stock to join Wall Street. The firm offers a platform that connects independent workers to employers with short-term contracts. Like many of its peers, Fiverr is still struggling to turn a profit, and its Q2 results showed that its net loss was growing. However, fresh off an IPO in June, most are expecting the firm to post a few quarters of losses before becoming profitable.
Fiverr marketed itself as a low-cost platform with side-gigs priced as low as $5. However, that niche has also led to a reputation for poor quality ‘gigs,’ a problem that could impede Fiverr’s growth moving forward. The firm is working to get buyers to spend more on higher-quality gigs through its platform, but doing so has proven difficult so far. Buyers each spent an average of $157 on the platform over the last year.
As Fiverr is still in the very early stages of growth, its hard to gauge whether or not the firm is on the path to profitability. So far investors are optimistic about FVRR stock’s long-term future.
As of this writing Laura Hoy did not hold a position in any of the aforementioned securities.