I recently read an article from ReadWrite, an online publication about emerging technologies. The article discussed independent contractors’ past, present and future in the modern workforce.
As a freelance writer, I couldn’t help but read it. After all, not a second passes without somebody posting a new piece about how artificial intelligence (AI) will affect the workforce of the future. I happen to think AI will help the gig economy. Feel free to disagree.
Technology has taken leaps and bounds throughout the past five years, which helped companies quickly transition to work-from-home, facilitating independent work.
Corporate management is now figuring out the proper balance between being in the office 100% of the time and zero time in the office. Like most things, the ultimate answer is somewhere in the middle.
The article got me thinking about stocks winning with independent contractors. Here are my three ideas.
Uber Technologies (UBER)
Uber Technologies (NYSE:UBER) arguably leverages the largest independent contractor workforce on the planet. As pg. 11 of Uber’s 2022 10-K states, “Our business would be adversely affected if Drivers were classified as employees, workers or quasi-employees instead of independent contractors.”
In August, a group backed by Uber and Lyft (NASDAQ:LYFT) drivers launched a ballot effort in Massachusetts to put the question of whether the ride-hailing companies’ drivers should remain classified as independent contractors on the 2024 election ballot.
“The ballot effort we are launching today, which closely mirrors what we proposed last year, will ensure that drivers have the flexibility to work where, when and how long they want while creating historic new benefits and protections,” said Conor Yunits, a spokesman for Massachusetts Coalition for Independent Work in a report from GBH News.
The unions would love to see drivers unionize. However, a segment of the driver community would like to retain their independence. A vote to maintain their independence would boost Uber, seemingly fighting lawsuits on all fronts.
According to the Ride Share Guy, there are 5.4 million Uber drivers worldwide. Most of those are independent contractors. Uber’s rideshare sales rose 6% in August throughout last year, while Lyft’s were flat year-over-year. Uber finished the month with 74% market share in the United States.
Uber’s sales were higher than pre-pandemic, starting in April 2022. In Q3 2023, Uber made its first-ever operating profit of $326 million on revenue of $9.2 billion. The Mobility segment of its business had adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.17 billion, up 52% from a year earlier and accounting for 78% of its EBITDA profitability.
Uber’s doing just fine with independent contractors.
eXp World Holdings (EXPI)
eXp World Holdings (NASDAQ:EXPI) is a holding company with three operating businessesOne of these is eXp Realty, a rapidly growing tech-driven real estate brokerage operating in the U.S., Canada and many other countries outside North America. The second, Virbela, provides cloud-based technologies for eXp. It operates a virtual reality campus for its real estate agents called eXp World. The third segment is Success magazine and coaching for its real estate agents.
In 2022, its North American business generated $4.55 billion in revenue, 22% higher than a year earlier. Its adjusted EBITDA was $103.3 million, down 12% from 2021. Overall, its adjusted EBITDA declined by 22% to $60.5 billion. This was down due to increased operating expenses resulting from a higher employee headcount and entering additional international markets.
I included eXp World Holdings in this trio of stocks because its real estate agents are all independent contractors directly or indirectly through a third-party brokerage. As of Dec. 31, 2022, it had 86,203 real estate agents. They performed 511,859 transactions in 2022. Technology has made it all possible.
Its stock is up 47% year-to-date.
Upwork (NASDAQ:UPWK) has lost considerable value throughout the past 24 months. In October 2021, the freelancing platform was trading around $60; today, it’s worth 81% less.
However, as companies try to force employees back to the office, Upwork’s freelance platform, which hooks up buyers and producers of creative content, should see increased activity from individuals opting out of a steady paycheck.
According to an Upwork survey, approximately 46% of millennial workers did some freelance work last year. The figure for Gen Z was slightly lower at 43%. There’s no question that a particular portion of the adult workforce will continue seeking freelance work. Upwork should benefit.
The company’s Q2 2023 results were encouraging. On the top line, its revenue was $168.6 million, 7% higher than a year ago, on Gross Services Volume of more than $1 billion, while its adjusted EBITDA was $14.4 million, up from a loss of $1.9 million in Q2 2022. As a result, it expects to generate as much as $55 million in adjusted EBITDA in 2023.
Unsurprisingly, Upwork is working hard to integrate AI into its platform. Both in terms of using generative AI to help its customers find talent more quickly and the number of AI experts looking for exciting projects.
In the first half of 2023, AI was the fastest-growing category for job posts. Generative AI job posts rose by more than 1,000%. It recently announced a partnership with OpenAI called OpenAI Experts on Upwork. The program gives OpenAI’s customers access to Upwork’s highly skilled AI talent pool. It had already been working with OpenAI to find top talent.
The stock will continue to be volatile, but aggressive investors should consider it.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.