We recently published a list of the 10 Cheap Internet Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Upwork Inc. (NASDAQ:UPWK) stands against the other cheap internet stocks to buy according to hedge funds.
Would March See a Pickup in Retail?
On March 6, Jan Kniffen, CEO of J Rogers Kniffen, appeared on CNBC’s ‘Squawk on the Street’ to discuss his outlook on retail. Weaving several threads of news in the retail space, he said that the fourth quarter was great despite an awful January and February due to the weather. However, the market is going to see a pickup in March as the calendar inches closer to Easter because even in the otherwise horrible month of February, the market saw a good Valentine’s Day.
He believed that March would see a pickup because the consumer still feels healthy, even if they are nervous. Spending has been pretty good on everything other than weather-related items, but the traffic has been slow. Kniffen believed that this trend is weather-related as well. He said that he isn’t too concerned yet, but while the retail numbers today may not make one nervous, tomorrow’s numbers may have the opposite effect. According to Kniffen, retailers are only seeing a little weakness, and that’s all weather-related.
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What Could Trump’s Tariffs Mean for the Retail Industry
Talking about the potential effects of tariffs on retailers, he was of the view that power and negotiating skills make up the necessary concoction to deal with the scenario. Companies with better logistics teams, experience with dealing with tariffs strategically, and a healthy position in terms of balance sheet are more likely to do well. Therefore, companies in the sector that are well-financed, boast great teams, and are executing flawlessly will do better than those struggling with dealing with tariffs. While Kniffen said that he couldn’t claim he isn’t worried about the tariffs, he isn’t terrified of them either, as the market knows how to deal with them.
The real question he posed was whether all that the market gets is 10% to 20% in China or whether it would really get 25% in both Canada and Mexico. In the second case, the whole economy gets dislocated, the consumer gets nervous, and everyone is terrified that they will quit spending and the market may go into a consumer-led recession.
However, if the tariffs were imposed only on China, the situation might be different. China has a significant export economy and would have to absorb a big chunk of the tariffs. It did so last time as well and is likely to do the same this time as well. The market will then also see substitution, trade down, and all the stuff we see when the consumer has to deal with it. The retail market will react to all that, and the big and strong members will likely react better.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of internet stocks with forward P/E less than 15, including stocks from the internet retail and internet content & information sectors. We then selected the top 10 with the highest number of hedge fund holders as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a hand holding a laptop, showing the user navigating their Upwork platform dashboard.
Upwork Inc. (NASDAQ:UPWK)
Forward P/E: 12.92
Number of Hedge Fund Holders: 28
Upwork Inc. (NASDAQ:UPWK) operates an online working marketplace that connects professionals and agencies with businesses. Its marketplace offers are specialized for clients looking to hire. The company has a resilient and innovative platform and a strong business model that lends it a competitive advantage. It reported a record revenue of $191.5 million in fiscal Q4 2024, surpassing analyst estimates and reflecting a 4.1% year-over-year growth. Its adjusted diluted earnings per share (EPS) of $0.30 also surpassed the $0.25 forecast.
Upwork Inc. (NASDAQ:UPWK) reported a 12% year-over-year revenue growth in fiscal year 2024. 2024 marked the sixth consecutive year of double-digit growth outperformance for the company compared to the staffing industry. Management expects 2025 to be a year of accelerated execution around its focused portfolio of growth catalysts, AI, enterprise, and ads & monetization.
Engaging in AI remains a significant driver for Upwork Inc. (NASDAQ:UPWK). By employing AI in its platform, Upwork aims to enhance user experience, boost user engagement, and bolster its competitive market position. The company reported that the AI-related domain of GSV underwent a 60% year-over-year growth, reflecting future revenue growth potential.
Pernas Research stated the following regarding Upwork Inc. (NASDAQ:UPWK) in its Q3 2024 investor letter:
“Upwork Inc. (NASDAQ:UPWK) is a leading global platform in the online freelance marketplace, connecting businesses with independent professionals (freelancers) for collaboration. The stock has fallen by approximately 85% from its peak due to concerns over slowing growth and fears of AI disruption. However, our analysis suggests these concerns are overstated. The slowdown in growth is primarily due to temporary cyclical factors, while the long-term trend of businesses increasingly turning to skilled freelancers remains strong. Although market sentiment views Upwork’s business case as weakening, we see it as strengthening. We estimate a 70% upside potential from current levels, making Upwork a compelling long-term investment. Long form write-up here.”
Overall, UPWK ranks 7th on our list of the cheap internet stocks to buy according to hedge funds. While we acknowledge the potential of UPWK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than UPWK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.