Why Upwork Stock Got Crushed on Friday

What happened

Shares of Upwork (NASDAQ:UPWK) were sharply lower on Friday, slumping as much as 15.7%. As of 12:47 p.m. EDT, the stock was down 11.6%. The cloud-based freelance-jobs marketplace reported mixed quarterly financial results that left investors wanting more.

For the second quarter, analysts had expected Upwork to lose $0.09 per share on revenue of $120.24 million. Instead, Upwork reported a wider loss of $0.13 on revenue of $124.2 million. 

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So what

Upwork reported gross sales volume — or the total amount of work billed by the freelancers on its platform — of $875.8 million, an increase of 50% year over year, marking the company’s “strongest sales quarter ever.” This helped drive revenue up 42%, better than the 37% growth management had forecast at the midpoint of its guidance. 

The company’s gross profit margin jumped two full percentage points to 73%. Unfortunately, an ongoing surge in spending kept Upwork operating at a loss, as it works to scale its business. Research and development (up 37%), sales and marketing (up 33%), and general and administrative expenses (up 89%), each ate into the company’s bottom line.

Now what

For the third quarter, management is guiding for revenue of roughly $126 million, which would represent year-over-year growth of about 30% at the midpoint of its guidance. 

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Management was seeing robust traction for the recently introduced Project Catalog, which allows businesses to buy certain jobs at a fixed price. CEO Hayden Brown said new customers were coming on board as a result. 

It’s important to remember that even after Friday’s slump, Upwork stock has soared more than 250% over the past year. For long-term investors, this decline is merely a blip on the radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/07/30/why-upwork-stock-got-crushed-on-friday/

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