Canaccord Downgrades Upwork Inc. (UPWK) to Hold
Canaccord analyst Maria Ripps downgraded Upwork Inc. (NASDAQ: UPWK) from Buy to Hold with a price target of $10.00 (from $22.00).
The analyst comments "Upwork reported mixed Q1 results, with softer GSV, in line revenue, and stronger profitability. GSV trends were tracking in line with internal expectations through early February but softened materially later in the month and through early April. Customers cited mounting macro pressures along with accelerated AI adoption, with sub-$500 contracts seeing the most pronounced weakness. Trends have since stabilized, albeit at lower growth rates more consistent with the past two years than the higher trajectory framed at the November Investor Day. To better evaluate the macro vs. AI impact, Upwork conducted an updated AI exposure analysis, concluding ~10% of GSV is in AI at-risk categories. Concurrent with the print, Upwork announced a restructuring to reduce headcount by ~24% and drive ~$70M of annualized cost savings (~$40M in 2026). Q2 revenue guidance was well below consensus, while profitability was broadly in line. Management reduced its FY26 revenue outlook by ~8% at the midpoint, which implies more than a 10% reduction for the remaining three quarters. FY26 adj. EBITDA guidance was raised modestly despite the lower top line, and Upwork now expects to achieve its 35% adj. EBITDA margin target in the back half of the year, more than two years ahead of schedule. While the revised outlook appears sufficiently de-risked, embedding further deterioration in marketplace trends despite the recent stabilization, reduced visibility into the trajectory of a marketplace recovery and the pace of AI-driven displacement lead us to downgrade to HOLD. While we acknowledge that the stock is trading at undemanding valuation levels and even a modest improvement in fundamentals could drive rapid multiple expansion, we see limited near-term catalysts at this time. We will look to revisit our rating upon any early signs of the operating backdrop stabilizing and the company returning to consistent revenue growth."
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Shares of Upwork Inc. closed at $10.61 yesterday.