Upwork price target raised at Roth

Its fourth quarter results are in the books and Roth MKM analyst Rohit Kulkarni still thinks there is money to be made on Upwork (Upwork Stock Quote, Chart, News, Analysts, Financials NASDAQ:UPWK)

On February 14, UPWK reported its Q4, 2023 results. The company posted Adjusted EBITDA of $30.5-million on revenue of $183.9-million, a topline that was up 14 pre cent over the same period last year.

“Last year proved Upwork’s continued growth momentum and strong profitability. Our business is flexible and resilient, as the skilled talent on Upwork are a critical resource to businesses small and large,” said CEO Hayden Brown. “Fueled by our continued investments in human-centered AI and innovation, growing advertising and subscription products, our differentiated Enterprise offering, and new integrations with marquee partners, we are confident in and excited about our long-term strategic plan to drive growth and transform work in 2024 and beyond.”

The analyst summarized the quarter and the action on the stock.

“Upwork shares were up +5% after hours last night (on top of +9.5% during the day) as the company reported a clean beat 4Q result and provided 1Q and 2024 guide generally above our/Street estimates,” he said. “UPWK is seeing growing traction with AI gigs and the company announced an AI startup acquisition. With improving Tech/Internet secular trends, we see an improved Upwork outperforming with these macro tailwinds.”

In a research update to clients February 15, Kulkarni maintained his “Buy” rating on UPWK but raised his price target on the stock from $14.00 to $19.00.

The analyst thinks the company will post EBITDA of $133.5-million on revenue of $777.1-million in fiscal 2024. He expects those numbers will improve to EBITDA of $164.7-million on a topline of $868.5-million in fiscal 2025.

Kulkarni discussed the company’s current valuation.

“At ~$16.00/share, UPWK is trading at approx. 15.0x revised ’24E EBITDA. We do not consider this valuation multiple as a premium one for UPWK’s expected 3-year EBITDA CAGR which could possibly exceed 40%. Alternatively, using the newly introduced Adjusted FCF metric, UPWK could generate >$90mn in aFCF in ’24 vs. $48mn in ’23, currently implying ~22.0x EV/aFCF ’24E. All in, given reasonable growth adjusted valuation, we’d be buyers on UPWK strength over the near term,” he concluded.