Upwork (UPWK) closed down roughly 19% on Feb. 10, after its disappointing Q1 outlook eclipsed an otherwise strong fourth-quarter earnings report.
UPWK now sits decisively below its 200-day moving average (MA), signaling a bearish technical setup and waning investor confidence in the near term.
Versus its year-to-date high, Upwork stock is now down more than 30%.
AI Tailwinds Could Help Upwork Stock Recover
According to Upwork, its revenue will fall between $192 million and $197 million in Q1, with up to $0.28 of earnings on a per-share basis. Analysts, in comparison, had called for $200.5 million in revenue and $0.34 in earnings per share (EPS).
However, this guidance may prove conservative, given the management’s commitment to artificial intelligence (AI) represents a material growth driver that’s being undervalued in the current risk-off environment.
In Q4, gross services value derived from AI-related work surpassed $300 million, up 50% year-over-year, reinforcing the marketplace’s ability to capture substantial value from the evolving AI economy.
Notably, nearly 70% of all job posts on the platform are now touched by Uma, the company's proprietary artificial intelligence tool, indicating deep penetration of AI capabilities across its user base.
This positioning as a foundational platform for AI-era work suggests notable long-term optionality that warrants investing in UPWK stock on the post-earnings plunge.
UPWK Shares Are Now Trading at a Discount
While a 6% decline in active clients seems like a headwind, gross services value per active client went up 7% in the fourth quarter, suggesting the firm is better monetizing its remaining user base.
What it signals is a qualitative shift toward higher-value engagements and more profitable client relationships.
Additionally, Upwork shares are now trading at a compelling valuation, with a forward price-to-earnings (P/E) multiple of about 13x only indicating they’re trading at a discount to both historical norms and peer valuations.
Note that UPWK’s relative strength index (14-day) is now hovering around 30, indicating dovish momentum is approaching exhaustion.
How Wall Street Suggests Playing Upwork
Wall Street analysts also seem to believe Upwork’s year-to-date decline is rather overdone, given the company maintains solid financial health with $673 million in cash and marketable securities.
The consensus rating on UPWK shares sits at a “Moderate Buy” currently, with the mean target of roughly $24 indicating potential upside of some 60% from here.
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