In this article, we will be taking a look at the 10 best gig economy stocks to buy.
The Rise of the Gig Economy
The pandemic era has been heralded as one of the most profitable periods for gig economy stocks, as more and more people started picking up remote work opportunities through online platforms looking to connect service providers with clients. But even before then, the gig economy has been a vital part of the market since, at any point in time, there will be a massive cohort of people who simply want to be their own boss – the pandemic just made it easier for these types of people to shine brighter.
Post-pandemic, as people began to realize that it was, in fact, possible to work from home, gig economy companies were able to hold on to their profits. Even after the return to offices, many individuals have decided to stick with remote work opportunities provided to them by well known online platforms. According to Michael Morton, Senior Analyst at MoffettNathanson, a major part of the reason why gig economy stocks have been performing well in the market this year is that investor perceptions about these businesses are changing. Previously, investors were less inclined to go for gig economy companies because they used to focus too much on growth and not enough on profitability. However, Morton believes that companies are changing this approach to make it the opposite now – the focus on profitability is now overruling that on growth.
Secular Tailwinds and Risks for Gig Economy Businesses
Morton believes that well-known gig economy businesses in the ride-hailing and food delivery spaces are promising enterprises that are set to benefit from secular tailwinds. The biggest tailwind for such businesses is their expansion into large, untapped, addressable markets. While there will be a degree of risk attached to these new endeavors as the big gig economy players start to pursue these opportunities aggressively with high levels of investment, there is room to argue that these investments will be for the overall benefit of the businesses that do tap into markets that have gone ignored so far – think Southeast Asia, India, Latin America, and Africa.
Another risk that some people see for gig economy businesses is in the regulatory domain. Morton believes that the services these companies are providing to consumers are important enough to necessitate a cooperative attitude from regulatory bodies across the globe, seeing as they not only offer what are now considered essential services but also provide a means of generating supplemental income for their workers. At the same time, most of your bigger gig economy players with operations in up to 70 countries have also shown the capability of working with a variety of regulatory landscapes.
These factors have been working wonders in terms of alleviating investor concerns surrounding gig economy stocks, a development that is leading to more investors being convinced to buy into these businesses. As a result, the popularity of these stocks is only going up, which is why we’ve compiled a list of some of the best gig economy stocks to buy now.
Photo by Peggy Anke on Unsplash
Our Methodology
We sifted through ETFs and online rankings to compile an initial list of 20 gig economy stocks. We then selected the 10 gig economy stocks with the highest number of hedge funds holding stakes in them, as of Q2 2024. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Best Gig Economy Stocks To Buy
10. Fiverr International Ltd. (NYSE:FVRR)
Number of Hedge Fund Holders: 19
Fiverr International Ltd. (NYSE:FVRR) is a human resource and employment services company based in Israel. It operates an online marketplace where freelancers can sell their services to a wide variety of clients.
Many investors have turned away from Fiverr International Ltd. (NYSE:FVRR) post-pandemic as the remote work spree has died down. However, this company remains an attractive gig economy player because of its capital-richness, which has enabled Fiverr International Ltd. (NYSE:FVRR) to indulge in significant share buyback programs, allowing the company to increase the value of its remaining shares in the market. For instance, in the second quarter, company management announced the completion of their $100 million buyback program.
For the second quarter, Fiverr International Ltd. (NYSE:FVRR) saw its revenue rise 6% year-over-year to $94.7 million, above the midpoint of its guidance. Operating and free cash flow were also up by 11.9% and 12.5% year-over-year, respectively. These figures highlight the strength of Fiverr International Ltd.’s (NYSE:FVRR) balance sheet, through which it is able to deploy an optimal capital allocation strategy while ensuring the return of shareholder value.
AI is also expected to have a net positive impact on Fiverr International Ltd. (NYSE:FVRR), according to company management. Overall, management expects revenue for the full year 2024 to grow by 6%-7% year-over-year.
We saw 19 hedge funds long Fiverr International Ltd. (NYSE:FVRR) in the second quarter, with a total stake value of $90.5 million. Engine Capital was the largest shareholder, holding 814,294 shares.
Baron Funds mentioned Fiverr International Ltd. (NYSE:FVRR) in its fourth-quarter 2023 investor letter:
“Fiverr International Ltd. (NYSE:FVRR) is the leading two-sided online freelance marketplace, offering a platform that connects businesses with freelancers across a variety of functions, from web design to digital marketing, computer programming, and inventory management. The stock has been weak due to a complex macro environment driving small businesses, who represent the majority of Fiverr’s buyers, to cut down on freelancing spending. This recent trend was exacerbated by investor fears that Generative AI (GenAI) would disrupt various freelancing jobs. While we agree that some freelancing functions are more exposed to artificial intelligence (AI) disruption than others (logo design for example), we believe Fiverr’s diverse platform as well as new incremental demand from AI-related work, would minimize the potential negative impact from GenAI. In our view, macro conditions are behind the recent deceleration in the company’s revenue growth. However, the fact that growth decelerated at the same time as GenAI adoption began gaining steam, created a bearish narrative for the stock. In our view, Fiverr’s current stock price overly discounts that risk and offers an extremely attractive risk-reward equation for long-term investors. Over 20% of the company’s market cap is in net cash, the stock is trading at approximately an 8% free-cash-flow yield, and management continues to make rapid progress on margin expansion; EBITDA margins are expanding from 7.2% in 2022 to 16.3% in 2023 based on the company’s mid-point guidance.”
9. Upwork Inc. (NASDAQ:UPWK)
Number of Hedge Fund Holders: 28
Upwork Inc. (NASDAQ:UPWK) operates a work marketplace that connects businesses with independent professionals and agencies. It is based in San Francisco, California.
This gig economy company has also been delivering growth so far this year, with revenue in the second quarter reaching $193.1 million, up 15% year-over-year. The profitability for Upwork Inc. (NASDAQ:UPWK) this quarter was its highest ever, as evidenced by a GAAP net income of $22.2 million. The company managed to generate such profitability despite macroeconomy challenges.
The biggest challenge Upwork Inc. (NASDAQ:UPWK) has been facing is the deceleration in the number of clients seeking workers on their platform. In the second quarter, this number fell by 6% sequentially, and Upwork Inc. (NASDAQ:UPWK) expects this type of trend to continue for the rest of 2024.
Despite this, Upwork Inc. (NASDAQ:UPWK) is continuing to leverage its intrinsic ability to shape-shift to wherever the market demand for skills is. The company is currently focusing on making itself the preeminent destination for AI talent and work while also improving customer productivity, engagement, and work outcomes in its products by incorporating AI-powered features and user experiences within its operations. Through such adoptions, Upwork Inc. (NASDAQ:UPWK) is expected to continue to perform well throughout the remainder of this year.
There were 28 hedge funds long Upwork Inc. (NASDAQ:UPWK) in the second quarter, with a total stake value of $247.3 million. Ancient Art (Teton Capital) was the most prominent shareholder, holding 7,339,684 shares.
8. Etsy, Inc. (NASDAQ:ETSY)
Number of Hedge Fund Holders: 36
Etsy, Inc. (NASDAQ:ETSY) is an e-commerce company that operates two-sided online marketplaces that connect buyers and sellers. It facilitates the global gig economy by uplifting Etsy sellers and providing them with a platform to sell curated goods to buyers in the Etsy marketplace.
A lot of investors have been worried about Etsy, Inc. (NASDAQ:ETSY) in recent times since inflationary pressures resulted in the company’s gross merchandise sales falling by 3.2% in the second quarter. However, many are more optimistic about the company’s prospects in light of the September rate cut, which may lead to Etsy, Inc.’s (NASDAQ:ETSY) GMS getting a boost.
Another reason why Etsy, Inc. (NASDAQ:ETSY) is considered a valuable stock is the existence of its economic moat. The company has a power network effect by virtue of the two-sided nature of its marketplace. In the second quarter, it reported 96.6 million active buyers and 8.8 million active sellers. Considering the fact that Etsy, Inc. (NASDAQ:ETSY) has been growing its buyer count significantly over the years, the platform has become increasingly more valuable to sellers. As more sellers join to make use of this value, the buyers get a wider range of choices. All in all, the platform becomes more valuable for all stakeholders as time progresses.
Considering these factors, Etsy, Inc.’s (NASDAQ:ETSY) current valuation is also quite cheap. The stock has a P/E ratio of 12.6 relative to the sector median of 17.3, making it clear that the stock is trading at quite a discount relative to its competitors.
Etsy, Inc. (NASDAQ:ETSY) was seen in the 13F holdings of 36 hedge funds in the second quarter, with a total stake value of $1.2 billion. Elliott Management was the largest shareholder, holding 4,500,000 shares.
7. eBay Inc. (NASDAQ:EBAY)
Number of Hedge Fund Holders: 38
eBay Inc. (NASDAQ:EBAY) is another e-commerce player on our list. It operates marketplace platforms connecting buyers and sellers globally, much like Etsy, and in doing so, significantly facilitates the gig economy by allowing sellers across the globe to operate their own businesses from home.
In the third week of September, eBay Inc. (NASDAQ:EBAY) hit its 52-week high with a $64 share price, outperforming the broader market. At the same time, the company has been buying back its shares in droves since 2023. Last year, eBay Inc. (NASDAQ:EBAY) repurchased stock worth $1.4 billion, and in the first six months of this year, it bought back another $1.5 billion of stock.
This buyback activity highlights the company’s belief that eBay Inc. (NASDAQ:EBAY) shares are currently undervalued in the market. With a P/E ratio of 13.2 versus the sector median of 17.4, this conclusion seems to be correct. With inflation continuing to cool down, many investors expect e-commerce players to start seeing greater attention and enthusiasm as well, which may mean that eBay Inc. (NASDAQ:EBAY) begins to finally get the attention it deserves.
A total of 38 hedge funds were long eBay Inc. (NASDAQ:EBAY) in the second quarter, with a total stake value of $924.6 million.
6. Lyft, Inc. (NASDAQ:LYFT)
Number of Hedge Fund Holders: 53
Lyft, Inc. (NASDAQ:LYFT) is a passenger ground transportation company that operates a peer-to-peer marketplace for ride-hailing and ride-sharing. It is based in San Francisco, California.
Like other ride-hailing players, Lyft, Inc. (NASDAQ:LYFT) works tirelessly to connect drivers to passengers. With growing passenger demand, companies like this one are starting to rake in profits. In the second quarter, Lyft, Inc. (NASDAQ:LYFT) reported an increase in its number of active riders of 20% and a record number of rides on its platform – 205 million, also up 15% year-over-year.
Because of these beneficial trends, Lyft, Inc. (NASDAQ:LYFT) saw revenue for the quarter rise by 41% year-over-year. The only major challenge that the company seems to be facing right now – and it’s a big one – is the existence of bigger competitors like Uber. While Lyft, Inc. (NASDAQ:LYFT) has a strong presence in North America, Uber has a greater global footprint and operates in more than 70 countries.
Despite this, Lyft, Inc. (NASDAQ:LYFT) is expected to accelerate its EPS by 22% in 2025. Many investors believe that as long as the company maximizes the opportunities present in the areas where it does have control, it should be good to go.
There were 53 hedge funds long Lyft, Inc. (NASDAQ:LYFT) in the second quarter, with a total stake value of $744.9 million.
5. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 56
Shopify Inc. (NYSE:SHOP) is an e-commerce company that operates a platform through which merchants sell their products through various sales channels. It is based in Canada.
Since Shopify Inc. (NYSE:SHOP) has a unique angle within the e-commerce space, many investors believe that this stock has massive upside potential. Through its platform, merchants are able to set up digital storefronts – a feature that uplifts millions of small businesses and merchants but which is also heavily used by major brands such as Nike and Red Bull.
The reason why so many businesses prefer Shopify Inc. (NYSE:SHOP) over other platforms that allow them to sell their own products, such as Amazon, is that Shopify Inc. (NYSE:SHOP) takes only a small percentage of your sales as a fee. This is in direct contrast with e-commerce giant Amazon, which charges even up to 45% of your sales as a fee. Because of this, Shopify Inc. (NYSE:SHOP) is continuing to attract a lot of smaller businesses and newer merchants, which is why its user base is only continuing to grow.
Finally, analysts are expecting AI to really boost Shopify Inc. (NYSE:SHOP) to greater heights. This company has the resources to attract AI developers to its platform since developers can add more functionality to the platform and, consequently, earn more money when users decide to incorporate their tools. Even today, Shopify Inc. (NYSE:SHOP) has several AI apps and features, such as chatbots and automated content creation, which are making the stock more profitable for investors.
In total, 56 hedge funds were long Shopify Inc. (NYSE:SHOP) in the second quarter, with a total stake value of $2.4 billion.
Rowan Street Capital mentioned Shopify Inc. (NYSE:SHOP) in its second-quarter 2024 investor letter:
Shopify Inc. (NYSE:SHOP) has been an incredibly rewarding investment for those lucky enough to get in early after the company’s initial public offering (IPO) in 2015. The shares have delivered a return of 2,600% or 42% annual. Its revenues have grown at 49% per annum since the end of 2014 from $105 million to estimated $8.6 billion in 2024. The massive e-commerce market is a huge opportunity, as the company’s growth indicates. As you tell from the chart below, revenues are forecasted to grow above 20% for the next 3 years. Keep in mind, Shopify has been around for more than a decade — and it’s still growing at these high rates.
We have owned Shopify for only 2.5 years, establishing our position in the first quarter of 2022 at a cost basis of $60, after the stock collapsed from its highs of $169 in November 2021. In hindsight, our entry may have been a bit premature, as the stock continued to plunge, eventually reaching a low of $27 in October 2022. However, such market movements are inherently unpredictable, and we seized the opportunity to invest in a company we had long admired…” (Click here to read the full text)
4. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 63
Airbnb, Inc. (NASDAQ:ABNB) is a company that operates an online platform for connecting homeowners to travelers looking to book a comfortable space during their travel. It is based in San Francisco, California.
Concerns about a travel slowdown are leading some investors to avoid Airbnb, Inc. (NASDAQ:ABNB) these days. Travel booking trends are the primary factor fueling these concerns, especially in North America, which is Airbnb, Inc.’s (NASDAQ:ABNB) most important market. In the region, while many people are still making bookings on the app for upcoming trips, the numbers have been falling for booking further out in the future.
Despite this, many investors do still believe in the intrinsic value of Airbnb, Inc. (NASDAQ:ABNB) as a revolutionary force in the travel sector. In the second quarter, the company’s revenue grew 11% to $2.75 billion, and its gross booking value was also up by 11% to reach $21.2 billion. Cash generation in the business is continuing strong, and the biggest reason for optimism when it comes to Airbnb, Inc. (NASDAQ:ABNB) is the fact that the company has a lot of room to grow internationally.
Outside of the US, Airbnb, Inc. (NASDAQ:ABNB) drives revenue growth through its presence in four other countries – Canada, France, the UK, and Australia. However, the company has also been investing significantly to set up operations in nations further away, such as Japan, South Korea, Latin America, India, and Southeast Asia. Seeing as many of these far-off locations are also incredibly popular as cheaper travel destinations, investors are hoping to see greater returns from Airbnb, Inc. (NASDAQ:ABNB) in the long run.
Airbnb, Inc. (NASDAQ:ABNB) was spotted in the portfolios of 63 hedge funds in the second quarter, with a total stake value of $2.6 billion.
3. DoorDash, Inc. (NASDAQ:DASH)
Number of Hedge Fund Holders: 67
DoorDash, Inc. (NASDAQ:DASH) operates a commerce platform through which merchants, consumers, and independent contractors can connect for delivery services. It is based in San Francisco, California.
This food delivery giant has generated stellar results in the second quarter, with Marketplace Gross Order Value coming in at $19.7 billion, exceeding management’s guidance. Revenue for the quarter was up 23% year-over-year at $2.6 billion. These financials have been primarily achieved because of DoorDash, Inc.’s (NASDAQ:DASH) commitment to improving its platform’s efficiency and user experiences, which have helped it drive consumer and merchant growth.
Despite this, some are concerned about the challenges DoorDash, Inc. (NASDAQ:DASH) is facing. The company is currently dealing with higher legal and regulatory expenses, which has led to it reporting a net loss of $158 million in the second quarter. With this, many are worried that DoorDash, Inc. (NASDAQ:DASH) may not be able to retain much of the cash it generates to invest in its own business model.
However, the company is working on international expansion, and it has recently entered four new countries and over 500 new cities through this scheme. DoorDash, Inc. (NASDAQ:DASH) also improved its free cash flow generation in the second quarter, which came in at $451 million, compared to $311 million in the same quarter a year ago. These factors have been effective in alleviating many investors’ concerns surrounding the stock.
DoorDash, Inc. (NASDAQ:DASH) had 67 hedge funds long its stock in the second quarter, with a total stake value of $3.2 billion.
TimesSquare Capital Management mentioned DoorDash, Inc. (NASDAQ:DASH) in its second-quarter 2024 investor letter:
“Our preferences in the Consumer-oriented sectors lean toward value-oriented or specialty retailers, franchise models, or premium brands. New to the strategy was the online food delivery platform and logistics provider DoorDash, Inc. (NASDAQ:DASH) Since its IPO in 2021, the company’s scale has grown to entrench it with customers and consumers, though we have been cautious about its high valuation. Recently, the company reported lower-than-expected guidance for future margins and that caused its shares to sell off. In our view, DoorDash was appropriately investing for future growth and absorbing recent increased wage costs. Believing this short-term price dislocation made for an attractive entry price, we began buying, and DoorDash was up 2% through the end of the quarter.”
2. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 145
Uber Technologies, Inc. (NYSE:UBER) is a passenger ground transportation company based in San Francisco, California. It offers ride-sharing and ride-hailing services through its platform.
This ride-hailing giant is well known for its expansive global reach and immense profitability. With the rise of autonomous vehicles and the current market discourse on robotaxis, Uber Technologies, Inc. (NYSE:UBER) is only getting more investor attention. The company is currently working to open up its ride-hailing network to big AV players so that robotaxi bookings can be facilitated through the Uber app. Through this, Uber Technologies, Inc. (NYSE:UBER) may just be able to cement its position in the very center of a potentially huge new sector in the automotive space.
According to the company’s CEO, Dara Khosrowshahi, in its second-quarter earnings call, the Uber consumer also seems to be in good shape right now. Uber Technologies, Inc. (NYSE:UBER) typically gets most of its user traffic from higher-income individuals, which is why the company isn’t seeing a decline in customer traffic this year, despite inflationary pressures persisting until September. This factor has also helped many investors develop more optimistic opinions about the stock.
At the end of the second quarter, 145 hedge funds were long Uber Technologies, Inc. (NYSE:UBER), with a total stake value of $8.7 billion.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is a big-tech e-commerce player. It entered the gig economy with the launch of Amazon Flex, an app that allows users to use their own vehicles to deliver Amazon packages to earn extra cash.
By investing in Amazon.com, Inc. (NASDAQ:AMZN), investors don’t just get to benefit from a classic gig economy player’s profitability since this company has a lot more going on. Its e-commerce business is among the biggest in the world and is the major driver of company revenues. In the second quarter, company revenue rose 10% year-over-year to $148 billion, and the biggest contributor to this was e-commerce sales.
The e-commerce business is really the heart of Amazon.com, Inc. (NASDAQ:AMZN) as a company. Through this segment, the company not only benefits itself, but also uplifts merchants selling on its platform – which in turn drives up profits for Amazon.com, Inc. (NASDAQ:AMZN) in the end. The second quarter also saw the e-commerce segment’s operating margin jump by 58% year-over-year to $5.1 billion, for instance. Most of the profits here come from online sales, but a huge chunk also comes from the fees charged to sellers on the Amazon platform.
Amazon.com, Inc. (NASDAQ:AMZN) is also well known for its cloud computing business, Amazon Web Services, which only makes it an even more lucrative player in the market for those looking to buy gig economy stocks that might be able to offer some extra profit generated from other lucrative business segments.
Holding a total stake value of $65.8 billion in the stock, 308 hedge funds were long Amazon.com, Inc. (NASDAQ:AMZN) in the second quarter.
While AMZN is an exceptional investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN and which trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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