The gig economy took off amid the COVID-19 pandemic, with companies' increasing reliance on independent contractors and freelancers. According to Gallup, roughly 36% of U.S. workers are part of the gig economy. Furthermore, 86.5 million people are expected to perform freelance work in the U.S. in 2027, according to Statista.
While the gig economy is expected to continue growing, with flexibility and contractual relationships becoming increasingly beneficial for both employers and workers, we believe some significant beneficiaries in this space do not possess adequate fundamentals to justify their current share-price levels.
Examples are popular gig economy stocks Airbnb, Inc. (ABNB), Uber Technologies, Inc. (UBER), and Fiverr International Ltd. (FVRR), which look significantly overvalued at the current price levels. So, we think it’s wise to avoid these stocks now.
Airbnb, Inc. (ABNB)
San Francisco’s ABNB is a popular company in the hospitality industry. It had an impressive stock market debut last December. The company's marketplace model connects hosts and guests online or through mobile devices to book spaces and experiences. It primarily offers private rooms and luxury villas.
ABNB’s revenue for the first quarter, ended March 31, 2021, was$886.94 million, up 5.4% year-over-year. Its gross booking value also increased 51.5% year-over-year to $10.30 billion. However, the company’s loss from operations increased 37.3% year-over-year to $446.95 million. ABNB’s net loss increased 244.2% from the same period last year to $1.17 billion. And its loss per share increased 50% year-over-year to $1.95.
In terms of forward EV/S, ABNB’s 15.18x is 885.7% higher than the 1.54x industry average. The stock’s 16.13x and 28.84x respective forward P/S and P/B are also higher than the 1.28x and 3.59x industry averages.
The company’s revenue is expected to increase 28.9% year-over-year to $6.96 billion in its fiscal year 2022. However, ABNB’s EPS is expected to remain negative in its fiscal years 2021 and 2022. Over the past three months, the stock has lost 20.4% to close yesterday’s trading session at $143.30.
ABNB’s poor prospects are apparent in its POWR Ratings also. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a D grade for Stability and Value. Click here to see the additional POWR ratings for ABNB (Growth, Momentum, Quality, and Sentiment). It is ranked #12 of 19 stocks in the F-rated Travel - Hotels/Resorts industry.
Uber Technologies, Inc. (UBER)
In addition to providing ride-sharing services under its Mobility segment, San Francisco-based UBER operates through three other segments: Delivery, Freight, and Advanced Technologies Group (ATG) and Other Technology Programs. The company preserved its business model when Proposition 22 was blocked in California last year.
The company is expected to release its second-quarter earnings results on August 4. UBER’s revenue declined 10.6% year-over-year to $2.90 billion for the first quarter, ended March 31, 2021. Its monthly active platform consumers (MAPCs) decreased 4.9% year-over-year to 98 million. Its loss from operations came in at $1.52 billion, up 20.7% year-over-year. Its net loss was $108 million versus $2.94 billion in the year-ago period. And its loss per share was $0.06 compared to $1.70 in the prior-year period.
UBER’s 5.76x forward EV/S is 196.9% higher than the 1.94x industry average. Its 5.50x forward P/S is 248.1% higher than the 1.58x industry average. The stock’s 6.76x forward P/B is also significantly higher than the 3.06x industry average.
Analysts expect UBER’s revenue to increase 38.5% year-over-year to $4.33 billion for the quarter ending September 30, 2021. However, its EPS is expected to remain negative for the about-to-be-reported quarter ended June 30, 2021, and for its fiscal year 2021. Over the past three months, the stock has lost 21.1% to close yesterday’s trading session at $46.14.
UBER’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The stock also has a D grade for Value.
Click here to see UBER’s ratings for Growth, Momentum, Stability, Quality, and Sentiment as well. In addition, UBER is ranked #56 of 74 stocks in the D-rated Technology – Services industry.
Fiverr International Ltd. (FVRR)
Headquartered in Tel Aviv, Israel, FVRR operates an online marketplace worldwide. The company’s platform connects businesses with freelancers offering digital services in more than 200 categories. Its global community of freelancers spans more than 160 countries.
For the first quarter, ended March 31, 2021, FVRR’s revenue came in at $68.32 million, representing a 100.1% year-over-year rise. However, its operating loss for the quarter increased 114.2% year-over-year to $13.83 million. Its net loss increased 189.9% year-over-year to $17.84 million. Its non-GAAP loss per share came in at $0.01 compared to $0.08 in the prior-year period.
In terms of forward non-GAAP P/E, FVRR’s 657.86x is 3,988.6% higher than the 16.09x industry average. The stock’s 29.19x and 32x respective forward EV/S and P/S are also higher than the 1.54x and 1.28x industry averages.
For the quarter ending September 30, 2021, FVRR’s revenue is expected to increase 53.2% year-over-year to $80.21 million. However, its EPS is expected to decline 31% year-over-year to $0.20 in its fiscal year 2021. The stock has lost more than 19% since hitting its 52-week high of $336 on February 16, 2021, to close yesterday’s trading session at $258.60.
FVRR’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which translates to Sell in our proprietary rating system. In addition, it has an F grade for Value, and a D grade for Stability and Quality. Click here to see more of FVRR’s component grades.
ABNB shares were trading at $142.54 per share on Thursday morning, down $0.76 (-0.53%). Year-to-date, ABNB has declined -2.90%, versus a 18.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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