The gig economy refers to flexible or temporary jobs for which companies hire freelancers and independent contractors in lieu of full-time employees. The United States is on its way to establishing a gig economy. As much as one third of the U.S. workforce was participated in a gig capacity as of 2021, with this percentage expected to rise.
In addition, the U.S.’ inflation rate hit 8.5% in March, its highest level in more than four decades; the raging inflationary situation has led to a rise in gig work. Approximately, 85% of independent workers have increased this type of work in the last six months, with some 45% doing so because of inflation, according to the 2022 Gig Payments Report, published by workforce payments platform Branch and card issuer Marqeta.
The global gig economy is expected to reach $455 billion in 2023, growing at a 17.4% CAGR. Given this backdrop, Wall Street analysts expect gig economy stocks DoorDash, Inc. (DASH), Lyft, Inc. (LYFT), Upwork Inc. (UPWK), and Uber Technologies, Inc. (UBER) to rally 48% in price or more.
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DoorDash, Inc. (DASH)
San Francisco-based DASH operates a logistics platform that connects merchants, consumers, and dashers globally. The company operates the DoorDash marketplace, which offers its customers services that include customer acquisition, delivery, customer support, and DoorDash Drive, a white-label logistics service.
On April 11, DASH announced the launch of DashPass for Students, a membership plan for college students that offers wallet-friendly options for DoorDash-delivered on-demand items. The affordable student plan, at $4.99 per month, might add to the company’s revenue stream.
On March 1, DASH announced that it had agreed to acquire Bbot, a technology startup company. The company might benefit from this acquisition because it is expected to gain operational capability and be positioned to support the evolving needs of restaurateurs and other food venue operators.
For the fiscal fourth quarter, ended December 31, DASH’s revenue increased 34% year-over-year to $1.30 billion. Its adjusted gross profit rose 28% from the prior-year quarter to $686 million. For its fiscal year ended December 31, its free cash flow improved 389.2% from the prior year to $455 million.
The consensus EPS estimate for the fiscal year 2022 indicates a 12.2% year-over-year increase. Likewise, the $5.92 billion consensus revenue estimate for the same year reflects a 21% improvement from the prior year.
The stock has gained 27.4% in price over the past year and 6.1% intraday to close yesterday’s trading session at $110.76.
Among 16 Wall Street analysts rating DASH, nine rated it Buy, and seven rated it Hold. The 12-month median price target of $164.21 indicates a 48.3% potential upside. The price targets range from a low of $118.00 to a high of $230.00.
Lyft, Inc. (LYFT)
LYFT in San Francisco is a peer-to-peer marketplace operator for on-demand ride-sharing in the United States and Canada. The company operates a multimodal transportation network that offers personalized rides and on-demand access to several mobility options.
On March 21, LYFT and global financial technology company Payfare launched a cashback rewards program for U.S. Lyft drivers on all fuel purchases to combat rising fuel prices. Lyft Direct cardholders will earn 4% cashback on all gas purchases and an additional 1% at more 19,000 gas stations through the end of June.
LYFT’s revenue increased 70.2% year-over-year to $969.90 million in its fiscal fourth quarter, ended December 31. Its adjusted net income came in at $32.10 million, and its adjusted net income per share stood at $0.09, both up substantially from their negative year-ago values.
Analysts expect LYFT’s EPS to increase 360% year-over-year to $0.13 for the quarter ending June 30, 2022. The Street expects revenue for the same quarter to rise 46.6% from the prior-year quarter to $1.02 billion. Furthermore, LYFT has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
LYFT’s shares have gained marginally over the past five days and 4% intraday to close yesterday’s trading session at $34.80.
Among the 25 analysts that rating LYFT, 17 have rated it Buy, and eight have rated it Hold. The 12-month median price target of $56.86 indicates a 63.4% potential upside. The price targets range from a low of $43.00 to a high of $78.00.
Upwork Inc. (UPWK)
UPWK operates a work marketplace that supports businesses connecting with various independent professionals and agencies across the U.S., India, the Philippines, and globally. The Mountain View, Calif., company’s marketplace provides access to talent and skills across various categories, such as sales and marketing, data science and analytics, and software development.
On January 10, UPWK announced a partnership with Catch, an all-in-one platform to administer benefits automatically. Through this partnership, the company is expected to provide access to healthcare benefits and personal payroll to independent professionals on the Upwork platform. Sam Bright, chief product & experience officer at UPWK, said, “With Catch and our other talent offering partnerships, we aim to empower highly skilled professionals to stay laser-focused on their careers and business opportunities.”
For its fiscal fourth quarter, ended December 31, UPWK’s total revenue increased 28.9% year-over-year to $136.86 million. This can be attributed to a 29.5% rise in marketplace revenues from the prior-year period to $125.43 million. The company’s cash, cash equivalent, and restricted cash balance stood at $352.06 million, up 51.4% from the same period the prior year.
The Street’s $0.23 EPS estimate for its fiscal year 2023 indicates a 235.3% year-over-year increase. Likewise, the Street’s $772.28 million revenue estimate for the same year reflects a 26% rise from the prior year. UPWK has topped consensus EPS estimates in three out of the trailing four quarters, which is impressive.
Over the past month, the stock has gained 14.3% in price to close yesterday’s trading session at $21.48. It has gained 1.9% intraday.
Seven Wall Street analysts rating UPWK have rated it Buy. The 12-month median price target of $39.71 indicates an 84.9% potential upside. The price targets range from a high of $48.00 to a low of $30.00.
Uber Technologies, Inc. (UBER)
UBER is a San Francisco-based developer and operator of proprietary technology applications in several countries, including the U.S. The company enables consumers to connect with independent ride services providers for ridesharing services.
On March 29, UBER and BP plc (BP) announced a global strategic convenience delivery partnership, extending their existing local arrangements to cover more customers. The partnership is set to reach retail stores in Australia, New Zealand, Poland, South Africa, and the West Coast of the U.S. On January 25, UBER announced its partnership with Smart & Final Stores, Inc., a grocery warehouse store for household and business customers, to expand its on-demand and scheduled grocery delivery to customers on the West Coast. These partnerships are expected to be beneficial for the company.
UBER’s revenue increased 82.6% year-over-year to $5.78 billion in its fiscal fourth quarter, ended December 31. Its net income attributable to UBER and net income per share attributable to UBER came in at $892 million and $0.44, respectively, up substantially from their negative year-ago values.
The $0.20 consensus EPS estimate for its fiscal year 2023 indicates a 130.3% year-over-year increase. And the $33.73 billion consensus revenue estimate for the same year reflects a 22.8% improvement from the prior year. UBER has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 6.1% in price over the past month and 1.2% over the past five days to close yesterday’s trading session at $32.63.
Of the 26 analysts rating UBER, 25 have rated it Buy, and one has rated it Sell. The 12-month median price target of $60.29 indicates an 84.8% potential upside. The price targets range from a low of $43.00 to a high of $80.00.
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DASH shares were trading at $110.79 per share on Thursday morning, up $0.03 (+0.03%). Year-to-date, DASH has declined -25.59%, versus a -6.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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