The pandemic has brought many shifts in personal and professional lives. Among the latest is the “phenomenon in recruitment and retention – the Great Resignation. News media has been increasingly absorbed with mass resignations that have occurred and their causes and potential impact, especially in the United States and United Kingdom,” highlights research led by Dr Martin Power of the National University of Ireland. It’s caused a massive rethinking of which stocks to buy as companies reel from labor shortages.
According to the Bureau of Labor Statistics, 4.4 million Americans left their jobs voluntarily in August—a record number. Resignations increased in accommodation and food services, wholesale trade, and state and local government education. A recent Harvard Business Review article further points out “Employees between 30 and 45 years old have had the greatest increase in resignation rates, with an average increase of more than 20% between 2020 and 2021.”
As the ‘Great Resignation’ has the potential to impact the U.S. economy significantly, businesses leaders and investors cannot ignore this movement. For instance, investors might keep an eye on how their portfolio companies fare in retaining their workforce and attracting top talent.
With that information, here is a list of seven stocks to buy that could directly or indirectly benefit from the Great Resignation movement:
- eBay (NASDAQ:EBAY)
- Fiverr International (NYSE:FVRR)
- Hubspot (NYSE:HUBS)
- Shopify (NYSE:SHOP)
- SoFi Gig Economy ETF (NASDAQ:GIGE)
- Uber Technologies (NYSE:UBER)
- Upwork (NASDAQ:UPWK)
Stocks to Buy: eBay (EBAY)
52-week range: $47.96 – $81.19
Dividend: 0.98%
E-commerce group eBay needs little introduction as both individuals and businesses can easily reach buyers worldwide. 2021 has so far meant impressive gains for EBAY stock, which is up over 50%. If some of the people quitting their jobs decide to start selling merchandise on eBay, we can expect the company to become one of the beneficiaries of the Great Resignation trend.
In late October, eBay issued robust Q3 earnings. Revenue of $2.5 billion was up 11%, while non-GAAP earnings per share (EPS) came in at 90 cents. The company had 154 million active buyers worldwide. Also during the quarter, the e-commerce group returned $2.4 billion to shareholders through share repurchases and cash dividends.
On the results, CEO Jamie Iannone said, “Our Q3 results, driven by the near completion of our managed payments migration, expansion of our advertising portfolio, and volume growth in our focus categories, demonstrate that our strategic playbook continues to work.”
Since the start of the pandemic, momentum has been with EBAY shares, which are up about 55% in the past 52 weeks. I believe eBay could be a solid Great Resignation stock to research further with a view to buy the dips.
Fiverr International (FVRR)
52-week range: $152.27 – $336
Israel-based Fiverr International is a platform for online freelance services, connecting employers with freelancers. Among the main areas of work covered by freelancers include digital marketing, graphics, design, writing, translation, video and animation.
Fiverr reported Q2 results in early August. Revenue increased 60% year-over-year (YOY) to $75.3 million. Non-GAAP net income was $7.9 million, or 19 cents per diluted share, compared to $3.6 million, or 10 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $146.7 million.
CEO Micha Kaufman remarked, “Fiverr delivered another great quarter as we saw robust revenue growth of 60% y/y driven by strong active buyer growth as businesses continue turning to Fiverr to access digital service providers.”
It may not be wrong to assume a large number of employees leaving their jobs look for freelance positions. Fiverr is well-positioned to benefit from this trend directly. In its last update, Fiverr issued guidance for revenue growth of 34% in the third quarter and 50% annually for fiscal 2021. The company will report Q3 earnings on Nov. 10. The Street expects it to outperform growth estimates.
Fiverr stock could especially appeal to risk-tolerant investors who can handle some volatility. It’s currently $188 per share, down about 3.5% YTD. It is down nearly 50% from its high, offering interested investors an opportunity to buy FVRR shares at a discount. However, despite the decline, shares are trading at 24.7x trailing sales, suggesting an overstretched valuation. A potential decline toward the $150 level would improve the margin of safety.
Stocks to Buy: Hubspot (HUBS)
52-week range: $342.39 – $854.68
Cambridge, Massachusetts-based HubSpot provides a cloud-based marketing, sales, and customer relationship management (CRM) platform. The applications are available for clients in a “land and expand” menu. As a result, marketers can modify their subscription level as their needs evolve.
Hubspot announced Q3 results on Nov. 3. Revenue soared 49% YOY to $339 million. Non-GAAP net income came in at $25.6 million, or 50 cents per diluted share, compared to $13.6 million, or 28 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $1.3 billion. Hubspot generated $38.2 million in free cash flow.
After the announcement, CEO Yamini Rangan said, “We’ve been well-positioned to meet the evolving needs of our customers this year, as evidenced by another quarter of impressive results.”
The company has recently incorporated financial technology services on its platform, addressing a growing need to integrate sales, account management, billing and collections. Such an updated platform should enhance customer retention and lead to further revenue growth. If more Americans launch their businesses, they could easily access platform services offered by Hubspot.
The stock hovers around $835 per share. HUBS has doubled in value since the start of the year. Forward price-to-earnings (P/E) and current price-to-sales (P/S) ratios stand at 345x and 32.2x, respectively. Those valuation ratios indicate an expensive stock, leaving little margin of safety for new investors, who could wait for a dip to go long HUBS shares.
Shopify (SHOP)
52-week range: $880 – $1704.39
Canadian e-commerce platform Shopify offers focuses on small and midsize merchants who use Shopify to manage sales across physical and digital locations, and coordinate activity on social media platforms. During the pandemic, it was hailed as a convenient one-stop-shop to grow e-commerce presence.
Shopify released Q3 results on Oct. 28. Revenue grew 46% YOY to $1.1 billion. Net income was $1.15 billion, or $9.00 per diluted share, compared with $191 million, or $1.54 per diluted share, in the prior-year quarter.
Adjusted net income declined to $102.8 million, down from $140.8 million. Cash and marketable securities ended the period at $7.52 billion. Investors were pleased with the Gross Merchandise Volume (GMV), which shows the dollar value of orders facilitated via the platform.
“It took 15 years for our merchants to get to $200 billion in cumulative GMV, and just 16 months to double that to $400 billion,” remarked CEO Harley Finkelstein. “As the share of GMV from offline expanded within our total GMV, it is clear that entrepreneurs are embracing a future in which retail happens everywhere.”
Shopify recently launched Shopify Markets, a product to make cross-border commerce easier for entrepreneurs. Those employees who are leaving their corporate jobs behind could regard Shopify’s integrated platform as a relatively easy way to enter global markets.
The stock trades at $1,672, up 48% so far this year. The current price seems to reflect SHOP’s long-term growth potential. Shares are currently trading at 323x forward earnings and 50x trailing sales. Potential buyers might wait for a pullback toward $1,475 before hitting the ‘buy’ button.
Stocks to Buy: SoFi Gig Economy ETF (GIGE)
Current Price: $37.50
52-Week Range: $31.45 – $48.58
Expense Ratio: 0.59% per year
Our next discussion centers around an exchange-traded fund (ETF). The SoFi Gig Economy ETF is an actively managed fund with exposure to ‘gig economy’ businesses that work with independent workforces.
Recent metrics highlight the “Global Gig Economy is expected to grow from $204 billion in 2018 to $455 billion in 2023, a Compound Annual Growth Rate (CAGR) of 17.4%… In the US, 44% of gig workers considered freelancing to be their primary source of income, with 60% of workers engaging in freelancing activities at least weekly.”
As the Great Resignation steams ahead, we can expect more people to work independently. SoFi emphasizes the high-growth potential of gig companies despite a certain level of volatility.
GIGE, which currently holds 74 securities, started trading in May 2019. The leading names on the roster include Spotify Technology (NYSE:SPOT), Shopify, Airbnb (NASDAQ:ABNB), Square (NYSE:SQ) and LendingClub (NYSE:LC).
The U.S. represents around half of the country allocation in this global strategy. Next in line are businesses from China, Israel and Canada. Meanwhile, the communications sector accounts for 56% of holdings, followed by technology and consumer staples.
Year-to-date, GIGE is up 2.5% and the ETF gained 19% in the past 12 months. Investors could regard the $35 level as a better entry point.
Uber Technologies (UBER)
52-week range: $38.08 – $64.05
San Francisco, California-based Uber Technologies offers commerce platforms for ride-sharing and meal delivery markets. Despite the company’s strong growth in the past several years, these markets do not create brand loyalty among users. As a result, Uber relies on cash incentives to bring both riders and users to its platform, making profitability hard to reach.
Uber released Q3 results on Nov. 4. Revenue grew 72% YOY to $4.8 billion. Net loss was $2.42 billion, or $1.28 loss per diluted share, compared to a net loss of $1.09 million, or 62 cents loss per diluted share, a year ago. Unrestricted cash and equivalents were $6.5 billion at the end of Q3.
CEO Dara Khosrowshahi remarked, “Our early and decisive investments in driver growth are still paying dividends, with drivers steadily returning to the platform, leading to further improvement in the consumer experience.”
The pandemic meant declines, especially in ride-sharing markets. Uber also faces various legal battles. As most its workers are contractors, they are not entitled to benefits such as health insurance or a minimum wage. The United Kingdom has already forced Uber to offer such benefits, and some U.S. states are on track to follow suit.
However, the consistent surge in top-line growth provides Uber significant flexibility in structuring its business and coping with legal issues. In addition, Uber has food delivery and freight businesses to boost revenues further.
UBER stock currently trades at $44 territory, down about 14% YTD. Shares have a reasonable valuation for a tech stock, selling for 5.7x trailing sales. Potential investors should consider buying around these levels.
Stocks to Buy: Upwork (UPWK)
52-week range: $30 – $64.49
Our last company, the Santa Clara, California-based Upwork is another platform, connecting businesses with freelancers. The Covid-19 pandemic has boosted Upwork’s active client base over the past five quarters.
Upwork reported Q3 results on Oct. 27. Revenue soared 32% YOY to $128 million. GAAP net loss more than tripled to 9.3 million, or 7 cents net loss per diluted share, compared to $2.8 million, or 2 cents net loss per diluted share, in the prior-year quarter. Cash and marketable securities ended the period at $697 million. It also has about 752,000 clients, up 25% YOY.
Management forecasts that the global freelance opportunity is worth as much as $1.3 trillion. However, the rapid growth in the freelance marketplace at the height of the pandemic seems to be slowing down. Yet the Great Resignation trend could still provide significant tailwinds for this growth name.
UPWK stock hovers at $45.50, down 25% from its high in the summer. But it’s still up 32% YTD. Shares are currently trading at 13x trailing sales.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
