Dissimilar to any disruptive event in modern American history, the coronavirus pandemic is the first disaster that has affected everyone: across state borders, class and income spectrums and demographic categories. Even if you weren’t especially negatively impacted, you almost certainly noticed the disruption to your working environment. Many were able to operate remotely while others lost their jobs, thus drawing cynical attention toward gig economy stocks.
Although it’s a distressing thought in many regards that so many lost their primary income source due to the global health crisis, from another angle, the relevant and burgeoning gig economy — or put simply, the rise of independent contractors — enjoyed massive growth. According to McKinsey & Company, the global food-delivery market tripled to $150 billion since 2017. In the U.S., this sector more than doubled during Covid-19, auguring well for gig economy stocks.
Still, the worrisome aspect is that the transition to gig work may be occurring too rapidly. For instance, a CNBC report cited data from the National Association of Colleges and Employers, which noted that “only 50.2% of the class of 2020 had full-time jobs with a traditional employer (meaning they are not working as a freelancer or entrepreneur) within six months of graduation.” Logically, this may be a positive for gig economy stocks.
But are we going to be a nation of fast-food delivery drivers? Regarding employment within six months of graduation, the class of 2020 had the worst outcomes since data was tracked beginning with the class of 2014. What’s worse, there may be decreasing incentives for companies to hire college grads. As the Wall Street Journal observed, U.S. companies are sitting on an $11 trillion debt pile. Thus, gig economy stocks could be startlingly relevant.
Indeed, with 10% of India’s population able to speak English — and with that figure expected to quadruple in the next decade — corporate America will have a ready-made workforce competing for pennies on the dollar. Why bother hiring Americans full time at that point? So yes, like it or not, these gig economy stocks may have a bright future ahead.
- Uber Technologies (NYSE:UBER)
- Lyft (NASDAQ:LYFT)
- DoorDash (NYSE:DASH)
- Airbnb (NASDAQ:ABNB)
- Upwork (NASDAQ:UPWK)
- Fiverr (NYSE:FVRR)
- Rover (NASDAQ:ROVR)
As with any market category, caution is the order of the day. With the Federal Reserve signaling a hawkish monetary policy, even the best gig economy stocks risk the possibility of red ink. Ultimately, though, tough economic conditions combined with massive student loan debt could mean the independent route sees upside.
Gig Economy Stocks: Uber Technologies (UBER)
To be upfront, ride-sharing giant Uber Technologies isn’t having the most auspicious start, whether compared to other gig economy stocks or in general. Down 7% on a year-to-date basis, UBER has shed 10.5% over the trailing six months since the close of the Jan. 12 session. Over the trailing year, it’s down 27.5%. However, the red ink could spell a long-term opportunity for UBER stock.
With millions still operating remotely — or having joined the gig economy themselves — Uber’s total addressable market widened. It’s not just about personal mobility. The company’s Uber Eats division is able to serve at-home professionals who value time over saving money on food-preparation costs. And when you’re a gig worker, sometimes the total cost of cooking your own food isn’t worth it.
Plus, the numbers speak for themselves. In the third quarter, Uber generated $4.8 billion in revenue, up over 72% from the year-ago level. Obviously, the increase from 2020 isn’t a surprise. However, the Q3 2021 sales tally was the biggest haul in Uber’s history as a public enterprise. Thus, it’s something to consider if you’re seeking gig economy stocks.
Similar to rival Uber, Lyft isn’t getting off to the brightest of starts. On a YTD basis, it’s even worse, shedding 8%. And on a trailing half-year basis, LYFT is staring at a near 26% loss. Nevertheless, one of the most recognizable brands among gig economy stocks could enjoy brighter sessions over the next few years.
First, the company is making a comeback after a rough year in 2020, which saw annual revenue decline almost 35% from 2019’s tally. In Q3 of last year, Lyft rang up $864 million on the top line. While this figure wasn’t the most in its history, it was still up an encouraging 73% against the year-ago quarter.
Second, though Lyft doesn’t print the largest sales figures, it’s adopting a more sustainability oriented business structure. Its net loss for Q3 2021 was $72 million, which contrasts sharply with Uber’s net loss of $2.4 billion.
Finally, both Lyft and Uber benefit from resurgent demand, a fire that even higher prices hasn’t extinguished. That may be part of the permanent carryover from the Covid years, which would make LYFT one of the intriguing gig economy stocks to buy.
Gig Economy Stocks: DoorDash (DASH)
In my last (and I believe only) coverage of DoorDash, I was quite negative on the company, expressing fears that DASH stock could dip to $72. Obviously, that didn’t happen although I’ll tell you something — at one point in May 2021, it certainly appeared that the equity unit was about to incur serious pain.
That was when the bulls came in to save the day, springing DASH to record closing heights last November and making it one of the top-performing gig economy stocks. However, a catastrophic erosion of market value devastated the food-delivery service provider. At time of writing, shares are trading hands at a bit under $130.
Essentially, we’ve come full circle since the price of publication of my aforementioned article.
I still have some concerns about DASH. Nevertheless, the resilient ecosystem of independent contract work has forced me to reassess multiple gig economy stocks. Specific to DoorDash, the company has demonstrated encouraging growth in its subscription service and it’s also expanding to other revenue streams such as its white-label logistics service DoorDash Drive.
Although many if not most gig economy stocks benefitted from the high-impact event of the coronavirus pandemic, there was one company that stood out as being decisively negative, at least from an outside fundamental perspective. Airbnb, which was one of the more celebrated disruptive companies — basically an Uber for the lodgings industry — was on its way to becoming among the top gig economy stocks.
Then the pandemic hit and that thought process went out the window.
Still, as people acclimated to Covid-19, another dynamic became increasingly conspicuous: retail revenge or the concept that people are ready and willing to open their wallets in an effort to make up for lost time. Further, many folks are simply frustrated with pandemic-related restrictions, thus boding well for ABNB.
Interestingly, shares experienced a spike higher throughout much of November. But once the omicron variant started to shake up the market, ABNB slipped lower. Nevertheless, the gut feeling I get from regular passersby is that they’re over this and any other variant. Therefore, ABNB at these deflated prices could be a discounted opportunity as travelers are eager to reclaim their normal lives.
Gig Economy Stocks: Upwork (UPWK)
On paper, Upwork ended the year down slightly at 1%, which implies that UPWK just trudged along sideways. Nothing could be further from the truth. Indeed, UPWK has seen some of the wildest trading among gig economy stocks or any other equity class. It’s just that how the one-year return for 2021 was calculated, UPWK just happened to land twice in near-identical spots.
On the other hand, we shouldn’t describe Upwork as having a positive time in recent sessions. For one thing, UPWK dropped 13% YTD. And in the trailing six months, it’s staring at a near-52% hemorrhaging. Although the company beat out various quarterly revenue estimates due to the rotation toward telecommuting and gig work, UPWK unfortunately has been consistently unprofitable.
Further, even as revenue jumped significantly both in 2020 and on a trailing 12-month-basis (through Q3 2021), net losses have also widened. As stated earlier, the Federal Reserve signaled that it’s concerned about soaring consumer prices. Therefore, an aggressive monetary policy is likely spooking stakeholders of high-growth, negative-income tech names.
Still, if the gig economy becomes the new norm, Upwork could eventually bounce back. And it’s also starting to look more attractive against key valuation metrics.
A freelance services marketplace for businesses looking to fill specific needs on a temporary basis, Fiverr seems like one of the perfect gig economy stocks for the new normal. And for quite some time, it certainly played the part. Back during the March 2020 doldrums, FVRR was trading hands at around the $20 level. By February 2021, the same stock commanded a price tag of well over $300 per each.
If you had the foresight to buy the dip and sell at the highs, congratulations! However, over the trailing year, the story has deflated considerably for what was once a Cinderella story among gig economy stocks, hemorrhaging an unbelievably disturbing 63.5%.
As a result of the damage, I’m not in a hurry to say that you need to consider this idea right now. On a YTD basis, FVRR dropped over 15%. Given the negative momentum, it could fall further. While you typically don’t lose this much over one exclusive reason, many shareholders were undoubtedly concerned about widening net losses despite strong revenue growth.
Nevertheless, the immediate future of the labor market may belong to gig economy stocks. Thus, FVRR is worth keeping tabs on.
Gig Economy Stocks: Rover (ROVR)
Billed as the word’s largest network of five-star pet sitters and dog walkers, Rover is an intriguing idea among gig economy stocks. As you know, the underlying sector isn’t just about people writing blogs while they sip a martini at a beach resort. Instead, some of these gigs are fun or quirky.
While you might laugh at the idea of people paying others to walk their dogs, it’s a viable business. From its website, Rover states that over two million “pet parents have booked a service on Rover with more than 500,000 pet care providers across North America and Europe.” Should independent contract work become the norm in the labor market, then dog walking may become even more lucrative.
As mentioned earlier, when you’re a gig worker, time truly is money.
Still, ROVR is something that you should only consider with money you can afford to lose. It came to the public arena via a reverse merger with a special-purpose acquisition company. Frankly, SPACs have been underperformers. Also, it has suffered the steepest decline on a YTD basis (down 24%), so extreme caution is the order of the day.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.