Gig economy stocks have taken off during the pandemic. The rise was somewhat justified as more businesses turned to gig workers and more people turned to gig employment during the pandemic.
However, now that we are emerging from the pandemic, gig economy stocks are clearly overvalued. Job-seekers and employers who turned to the gig economy during the pandemic will now largely return to traditional work-employee relationships. This spells bad news for gig economy stocks.
Let’s take a quick look at three gig economy stocks that are overvalued and primed for a decline: Airbnb (ABNB), Uber Technologies (UBER), and Fiverr International (FVRR).
ABNB is currently trading at $163. The stock’s 52-week high is $219. UBER’s 52-week low is $121.50. ABNB is a POWR Ratings dud with an overall grade of D, which translates into a Sell rating. The company also has grades of D in the Value, Growth, and Stability components. Click here to find out how ABNB grades in the Momentum, Quality, and Sentiment components.
Of the 19 publicly traded companies in the Travel – Hotels/Resorts industry, ABNB is ranked 13th. You can find stop stocks in this industry by clicking here. Analysts are not exactly hyper-bullish on ABNB. As more traveling picks up, people will feel more confident staying at actual hotels that are thoroughly cleaned instead of ABNB homes that might have a coronavirus variant on the premises.
Uber Technologies (UBER)
UBER, priced at $52, is trading $12 away from its 52-week high of $64. There is no doubt UBER bookings will increase as society gradually reopens. However, investors have been investing with the reopening in mind, meaning the uptick in UBER revenue is already baked into its current price.
UBER has an overall grade of D, which is a Sell rating in our POWR Ratings system. The company also had grades of D in the Quality, Sentiment, and Value components. If you are curious about how UBER grades out in the remaining components such as Momentum, Stability, and Growth, you can find out by clicking here. Of the 76 publicly traded companies in the Technology – Services industry, UBER is ranked 65th. Click here to find top stocks in this industry.
The Biden administration is now considering classifying gig workers as employees. UBER will be on the hook for hundreds of millions of dollars in benefits and pay if this change is made. The reclassification of UBER’s workforce would put a sizable and unexpected dent in the company’s profits in the years and decades ahead.
Fiverr International (FVRR)
Ask anyone who has used FVRR about the website’s user experience design, and you will find it isn’t exactly the easiest gig economy platform to use. FVRR certainly provides employers with a cheap labor force, yet the primary reason people are flocking to the platform is that unemployment is still high. As more people become employed, that will change.
FVRR is a POWR Ratings disappointment with an overall grade of F, translating into a Strong Sell rating. The company has a grade of F in the Value component and grades of D in the Quality, Sentiment, and Stability components. If you are curious about how FVRR fares in the remainder of the components, including Momentum and Growth, you can find out by clicking here.
While the mad scramble for low-paying gig jobs has certainly been a boon for FVRR’s bottom line, the stock is overpriced. The stock has a forward P/E ratio of 395.61.
Want More Great Investing Ideas?
REVISED: 2023 Stock Market Outlook (includes top 7 picks)
ABNB shares were trading at $168.26 per share on Wednesday morning, down $0.64 (-0.38%). Year-to-date, ABNB has gained 14.62%, versus a 11.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|ABNB||Get Rating||Get Rating||Get Rating|
|UBER||Get Rating||Get Rating||Get Rating|
|FVRR||Get Rating||Get Rating||Get Rating|