2 Gig Economy Stocks to Buy Amid Labor Paradigm Shifts

While the COVID-19 crisis has imposed a horrific nightmare, the pandemic has triggered a dramatic paradigm shift in the workforce. Running out of options, employers in white-collar industries have had no choice but to implement a mass work-from-home experience. However, now that many employers are recalling their worker bees to their posts, at least a few reluctant workers can branch out on their own. In this case, two gig economy actions – PayPal (NASDAQ: PYPL) and Upwork (NASDAQ:UPWK) – can benefit from it.

During the first phase of the global health crisis, several tech-related companies that allowed people to operate remotely achieved meteoric results. However, as TipRanks Contributor Joey Frenette noted that following social normalization trends, many of these hot commodities have deflated sharply. Indeed, some of the biggest work-from-home (WFH) stocks have lost more than 80% of their net worth from peak to peak. Cynically, however, gig economy stocks could pick up where the WFH games tumbled.

Primarily, the narrative boils down to economic realities. In late August, the Federal Reserve signaled that inflation posed a massive threat to long-term economic stability. True to its hawkish monetary policy, the Fed recently raised the benchmark interest rate by 0.75%. However, the latest September jobs report – which was hotter than economists expected – will likely prompt the central bank to act more aggressively in its tightening strategy.

Usually, governments look for strong labor markets for their countries, as this is directly correlated with higher spending. In turn, this increase in spending is expected to stimulate broader economic activity, leading to the hiring of additional people. However, this dynamic also means that more money is chasing fewer goods, leading to the very inflation problem the Fed wants to control.

According to the central bank’s vision, it must deflate the labor market to reduce the escalation in consumer prices. As a result, recession fears are on the way, with many top companies already announcing layoffs. Such a circumstance would not bode well for workers who insist on telecommuting, as it makes them look less like team players.

Most are likely to capitulate due to unfavorable developments in economic realities. However, some people will resist, branching out as independent entrepreneurs, and that could very well help gig economy stocks below buy.

PayPal

A specialist in the financial technology (fintech) space, PayPal offers an online payment system as well as business management tools for entrepreneurs. By facilitating intuitive transactional services as well as administrative issues such as billing protocols, PayPal enables independent entrepreneurs to get up and running quickly, making it one of the most powerful names among gig economy stocks. to buy.

Still, the risky nature of the current equity sector environment has hurt PYPL disproportionately, as the company has lost around 55% of its market value since the start of the year. Nevertheless, the sale is probably too abrupt. Although competition issues exist for PayPal, the brand ranks among the best known in the world. Given that people tend to gravitate toward the familiar, the upside narrative for PYPL stocks likely remains intact.

Additionally, PayPal’s business profile is significantly undervalued. Anchored by a solid balance sheet, the company comes to life through the income statement. For example, PayPal has a three-year revenue growth rate of 18.5%, which ranks better than nearly 79% of companies listed in the credit services industry. Additionally, PayPal has a return on equity of 9.78%, well above the underlying industry median statistic of 5.68%.

What is the fair price of PayPal shares?

On Wall Street, PayPal stock has a strong buy consensus rating based on 24 buys, seven holds and no sells assigned over the past three months. The average PayPal price target is $120.82, implying an upside potential of 42.2%.

Upwork

Formerly known as Elance-oDesk, Upwork represents an independent marketplace. Essentially, Upwork connects some of the best freelance talent with companies looking to meet specific needs. In many ways, the business offers a win-win scenario: businesses receive the services requested while independent contractors make a living providing them.

From the spring doldrums of 2020 to the final quarter of 2021, UPWK has garnered strong interest among retail investors. Unfortunately for longtime stakeholders, Upwork shares have been in a slump since October. Indeed, UPWK has lost over 59% of its market value for the year so far, making the investment profile admittedly speculative. Still, demand for gig economy stocks is expected to grow over time, especially names like Upwork, which directly connect independent contractors to potential earning opportunities.

To be fair, Upwork doesn’t have the strongest metrics when it comes to financial stability. However, it remains an attractive growth opportunity. For example, in its second quarter of 2022, Upwork reported revenue of $156.9 million, representing a year-over-year increase of more than 26%. For funds intended for speculation, UPWK might be worth a shot.

Is UPWK a good stock to buy?

As far as Wall Street is concerned, UPWK stock has a moderate buy consensus rating based on six buys, three holds and no sells assigned over the past three months. The average UPWK price target is $28.11, implying an upside potential of 103.8%.

Takeaway: Gig economy stocks will likely benefit from human nature

Although the current impasse between employers and employees over the push to the office may seem shocking, in reality, this conflict has a long history. After all, the Cold War has its roots in the Communist Manifesto. In other words, the workers sometimes take drastic measures against the owners of the means of production. It’s just human nature. Logically, then, the beauty of gig economy stocks to buy is that they lock that universal sentiment into profitability.

Therefore, the current downturn in the equity sector represents a potential opportunity to acquire these relevant market insights at a discount.

Disclosure

Michael A. Bynum