Canaccord Genuity has maintained its Buy rating and a price target of $15.00 on Upwork Inc. (NASDAQ: NASDAQ:UPWK), following the company's announcement of preliminary third-quarter results.
The freelance services platform's Gross Services Volume (GSV) surpassed estimates, with revenue and adjusted EBITDA exceeding the higher end of their guidance ranges.
Upwork revealed it is implementing measures to streamline its organizational structure and enhance efficiency, including a workforce reduction of approximately 20%. These steps are part of Upwork's strategy to improve adjusted EBITDA margins, which have already expanded by around 21 percentage points over the previous seven quarters.
The company aims to advance toward its five-year goal of 35% adjusted EBITDA margins.
The announcement of Upwork's better-than-expected preliminary results has led to a rally in UPWK shares. The company's commitment to sustainable profitable growth was highlighted by these recent developments, according to Canaccord Genuity's analysis.
In other recent news, Upwork's preliminary third-quarter results for 2024 indicate a 22% adjusted EBITDA margin, surpassing previously issued guidance.
The estimated revenue for the quarter is $194 million, exceeding the forecasted range of $179 million to $184 million. Preliminary net income and adjusted EBITDA figures, $28 million and $43 million respectively, also outperformed expectations.
Upwork also announced organizational changes aimed at enhancing profitability and efficiency, including a 21% workforce reduction and the adoption of more automated processes. These changes are expected to yield about $60 million in annual cost savings. Ernesto Lamaina has been appointed as Upwork's general manager of Enterprise, bringing extensive experience from the staffing industry.
In terms of analysts' notes, Roth/MKM reduced Upwork's stock price target to $13 from $19, maintaining a Buy rating. BTIG also reaffirmed its Buy rating and $14.00 price target for Upwork. Citi updated its stance on Upwork, reducing the price target to $11 from $13 while maintaining a Neutral rating.
InvestingPro Insights
Upwork's recent performance and strategic moves align with several key insights from InvestingPro. The company's impressive gross profit margins, highlighted as an InvestingPro Tip, are evident in the reported 76.18% gross profit margin for the last twelve months. This robust profitability supports Upwork's ability to invest in growth while pursuing efficiency measures.
The company's focus on improving adjusted EBITDA margins is reflected in the significant EBITDA growth of 173.23% over the last twelve months. This aligns with another InvestingPro Tip suggesting that net income is expected to grow this year.
Upwork's stock has shown strong recent performance, with a 24.07% return over the last week and a 19.53% return over the last month. This surge likely reflects the market's positive reaction to the company's preliminary results and strategic initiatives.
For investors seeking a deeper understanding of Upwork's financial health and potential, InvestingPro offers 13 additional tips, providing a comprehensive analysis of the company's prospects and market position.
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