UPWK long and FVRR short pair trade:
– Market misunderstands the differences in medium-term margin structures of both businesses.
– FVRR take rate is already 2x higher vs UPWK.
– FVRR’s future SG&A needs to build out the Business segment are understated.
– UPWK has already invested into the sales force required to attract larger accounts.
– UPWK is expected to inflect over the next 36 months.
– Author is generally bullish on the long-term potential of outsourced freelance work.
Valuation: Both FVRR and UPWK are similarly valued on EV/Revenue and EV/GP, but with vastly different margin improvement expectations going forward.
Exp. gain: 30-70% over the next 6-12 months.
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