The gig economy is alive and well, providing investors with many gig economy stocks to buy.
Corporate America’s reliance of independent contractors and freelancers, as well as people’s desire to make extra money, has only grown during the Covid-19 pandemic. Today, it is estimated that 43% (nearly half) of American workers are participating in the gig economy. Combined, gig workers in the United States earn a total of $1 trillion per year through freelance, part-time and contract income.
Furthermore, 90% of Americans say they would consider taking on freelance or independent contract work. Given these statistics, it should come as no surprise that gig economy companies are continuing to thrive and post strong gains on the stock market.
Several of the biggest initial public offerings (IPOs) this past year involved gig economy companies. In this article, we look at seven gig economy stocks to buy as the sector continues to grow.
Gig Economy Stocks to Buy: Airbnb (ABNB)
Airbnb was one of the gig economy companies to hold a blockbuster IPO in 2020. On December 10, ABNB stock more than doubled in price on its debut, closing at $146 a share. The IPO price had been $68 per share.
In fact, the $3.7 billion raised by Airbnb made it the biggest U.S. IPO this year. The result of the IPO was a bit of surprise given that Airbnb runs an online marketplace for vacation rentals in an industry that has been decimated this year by pandemic-related lockdowns and travel restrictions.
Airbnb, which remains unprofitable, said prior to its IPO that the company’s revenue fell 32% to $2.5 billion in the first nine months of 2020 as the coronavirus kept travelers at home. Airbnb was even forced to put off its IPO, which was initially planned for early spring, when Covid-19 sent the global economy into a tailspin.
Investors appeared willing to put all these considerations aside and scoop up ABNB stock. Despite the hardships of the past year, Airbnb is looking to the future with plans to add more hosts and properties in countries such as India, China and Latin America. It also looks like Airbnb’s business is starting to rebound. The company said the number of nights and experiences booked, which plummeted 72% in April compared to 2019, were down just 20% in September of this year.
UBER stock has had a nice run in 2020 despite the challenges presented by the pandemic. Since bottoming in March, Uber’s share price has risen 293% and now trades at $53.97 a share.
The company has proven to be nimble when it comes to adapting its business. In early December, Uber announced that it is selling its autonomous driving unit, Uber Advanced Technologies Group (ATG), to self-driving car startup Aurora in a deal worth $4 billion. Following the sale, Uber will also invest $400 million in Aurora and hold a 26% ownership interest in that company. The deal was greeted enthusiastically by Wall Street, which sent Uber shares up 3% on the news.
Uber has also restructured its business lines into five segments that are now called Mobility (previously called “Rides”), Delivery, Freight, Advanced Technologies Group, and All Other (previously called “Other Bets”). In its most recent third quarter, the majority of Uber’s revenue (46.4%) came from the Delivery segment. Revenues from Delivery rose more than 100% year-over-year to $1.5 billion.
The company’s delivery business has seen orders spike from customers who are stuck at home. Freight revenue is also growing, up 32% to $288 million. These results have impressed investors enough to keep bidding up UBER stock.
A lot of people have turned to Etsy during the Covid-19 pandemic. The e-commerce website that’s focused on handmade and vintage items, as well as craft supplies has attracted a growing number of hobbyists, craft makers and people who are looking to pass the time while sheltering in place at home.
Etsy has responded to the rise in visitors to its website by diversifying its offerings to include jewelry, bags, clothing, home décor, furniture, toys, art, tools and various collectables. Etsy’s third-quarter financial results, released at the end of October, showed global sales jumped 128% compared to the same period of 2019.
Etsy now counts nearly four million active sellers, and growing. The success has been reflected in ETSY stock, which is up more than 400% from its March low and now trades around $180 a share.
Etsy has also proven to be incredibly strong when it comes to competing with rivals such as Amazon (NASDAQ:AMZN). Etsy charges lower commissions than Amazon’s rival platform called “Amazon Handmade.” Etsy also charges fees per item listed on its site as opposed to monthly subscription fees charged by Amazon.
Etsy’s fee structure has made it more attractive to individual and smaller merchants. Etsy is also attractive to younger shoppers. A survey by The Harris Poll found that 37% of millennial women in the U.S. preferred handmade gifts over gifts bought in a store, while 65% of all millennials preferred buying holiday gifts from small, independent retailers rather than big corporate retailers.
Upwork is an online platform designed specifically for freelance workers. It enables companies to connect with individuals who are looking for freelance work ranging from professional writing and accounting to driving and deliveries.
In many respects, Upwork is the quintessential gig economy company as it helps to facilitate gig work. And since the March meltdown, it has been all upside for UPWK stock. At its low this past spring, Upwork shares were trading at $5.14 each. Since then, the share price has risen 678% and now trade at $36. That’s an impressive run up and speaks to the growing strength of the gig economy.
Analysts recently scrambled to upgrade UPWK stock to a “buy” after better-than-expected third quarter results and strong forward guidance. Upwork’s third-quarter sales grew 24% on an annualized basis to $96.7 million. Adjusted earnings rose from one cent per share to 4 cents per share. Analysts were expecting a net loss of 6 cents per share for the quarter.
Looking ahead, management provided sales guidance for the fourth quarter of $96.8 million. Analysts had been expecting guidance on revenues of $93 million. The quarterly results and strong forward guidance has propelled Upwork stock higher in recent months.
DoorDash is another gig economy company that recently held a spectacular IPO. The food delivery service, founded in 2012, saw its share price jump 92% on its stock market debut. The IPO price was $102 a share, but DASH stock finished its first day of trading at $189.51.
Mid-day, the stock traded as high as $195.50 per share. It ended up being the third-biggest IPO of 2020 and a big vote of confidence in the Palo Alto, California-based company. DoorDash now has a market capitalization of more than $60 billion — higher than the Ford (NYSE:F).
Investors seem to like the fact that DoorDash holds a 50% share of the U.S. market for food delivery, ahead of its closest rival GrubHub (NYSE:GRUB), according to documents filed with the U.S. Securities and Exchange Commission (SEC). DoorDash’s market share has risen from just 17% in January 2018.
The company said there is an opportunity for its market to expand even further, with fewer than 6% of Americans currently using its service. Revenue in the first nine months of the year more than tripled due to a surge in new customers during the pandemic. It all bodes well for DoorDash’s future and its share price.
Fiverr may seem like one of the more improbable gig economy stocks. The Israeli company is another online marketplace for freelance services. However, the company originally got its name because the services offered on its platform would be performed for just $5.
That model has since changed and FVRR stock has been on fire ever since. Year-to-date, the company’s share price is up 752%. Since January 2020, Fiverr stock has risen from $22 a share to $223. The spectacular run has been fueled, in large part, by the pandemic that has pushed more people to seek freelance and contract work.
Fiverr is also a truly global company that connects freelance and contract workers with employers all around the world, which has helped the company and its stock.
In November, Fiverr announced that it has expanded its international footprint to Latin America, with new offerings in Brazil and Mexico. By offering payment options and services in the native language spoken in individual countries, Fiverr is able to attract more customers to its platform.
Fiverr also launched this past September “Fiverr Business,” a subscription-based platform that helps corporate teams collaborate more efficiently with outside freelancers. The subscription service should help bolster revenues and the company’s bottom line moving forward.
Another popular and successful Israeli gig economy company is Wix.com, a software company that provides web development services. Essentially, Wix enables people to create their own websites using simple drag and drop tools. It’s proven to be popular with freelancers and contract workers who want to advertise and promote their work and services.
WIX stock has been a strong performer throughout 2020, up 254% since March at about $255 a share. The company operates on a subscription basis that enables customers to access and keep their websites updated for a monthly fee. It’s a business model that has proved to be successful.
While the website creation and maintenance business has been a strong performer for Wix, the company got a boost in the second half of 2020 after it launched “Wix Payments” in June, an online payment-processing service similar to PayPal (NASDAQ:PYPL). Positioned as an eCommerce solution, Wix Payments provides merchants and entrepreneurs with the ability to send and receive payments, manage invoices and keep transaction records, as well as shipping features.
The initial reaction to Wix Payments has been positive, particularly from small business owners and independent contractors.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.