Upwork (UPWK) Breaks Out on Q3 Beat and Strong Guidance

Stifel upgraded the stock to Buy with a $31 price target

Upwork Inc. (UPWK) shares soared more than 25% during Thursday's session after the company reported better-than-expected third quarter financial results and strong guidance.

Key Takeaways

  • Upwork shares moved sharply higher during Thursday's session on better-than-expected third quarter financial results.
  • Stifel upgraded the stock to Buy with a $31 price target, citing accelerating Marketplace adoption rates that could drive 20%-plus revenue growth.
  • The stock's relative strength index (RSI) jumped to overbought levels, but a bullish moving average convergence divergence (MACD) crossover signals the start of an intermediate-term uptrend.

Revenue rose 24% to $96.75 million, beating consensus estimates by $6.31 million, and non-GAAP earnings came in at four cents per share, beating consensus estimates by seven cents per share. Gross service volume rose 23% to $654.5 million, driven by increases in both new and existing customers using its freelance platform.

Management expects fourth quarter revenue to be between $96 million and $98 million, which is significantly higher than analyst expectations of just $92.66 million. The company also continues to expand its platforms to serve customers with the Project Catalog – a curated collection of pre-scoped projects that provide click-and-buy opportunities.

Stifel upgraded Upwork stock from Hold to Buy and raised its price target from $17 to $31 per share, saying that accelerated Marketplace adoption should drive 20%-plus revenue growth over the next 12 months alongside expanding margins.

Chart showing the share price performance of Upwork Inc. (UPWK)

From a technical standpoint, Upwork stock broke out from trendline resistance during Thursday's session on high volume. The RSI spiked into overbought territory with a reading of 85.53, but the MACD experienced a bullish crossover. These indicators suggest that the stock could see some consolidation before extending its move higher over the coming sessions.

Resistance, or a resistance level, is the price at which an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price.

Traders should watch for consolidation above trendline resistance at $22.00 over the coming sessions. If the stock extends its move higher, traders could see a move toward Fibonacci extension levels of $31.45. If the stock breaks down from trendline support, traders could see a move to the 50-day moving average at $17.78 or lower trendline support at $15.00.

The Bottom Line

Upwork shares moved sharply higher during Thursday's session after the company posted better-than-expected third quarter financial results and received a significant upgrade from Stifel analysts. While the stock appears overbought in the near term, the intermediate term looks bullish following the MACD crossover.

The author holds no position in the stock(s) mentioned except through passively manage index funds.

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