Gig Economy Stocks: Resilience Amid Economic Uncertainty

Current Performance Overview

Uber, Airbnb, Upwork, and DoorDash are demonstrating resilience and strong performance amid economic uncertainty. Uber benefits from its countercyclical platform, Airbnb has successfully restructured, Upwork is leveraging AI and expanding its enterprise market, and DoorDash's new verticals are experiencing significant growth.

"Were the current macroeconomic fears to materialize, we’re confident that Uber can perform well because of the countercyclical nature of our platform. On the mobility side, more driver supply brings down prices for riders and improves reliability, and on the delivery side, merchants are investing in performance channels like ours for growth, improving selection and affordability for consumers." --- (UBER, earning call, 2024/Q2)

"And I think on that measure, we've been arguably wildly successful in terms of restructuring and making this a much stronger business model than it was back in 2019. I think the EBITDA levels as well" --- (ABNB, conference, 2024/05/30)

"These levers include, first, continuing to leverage Upwork's intrinsic ability to shape-shift to wherever the market demand for skills is, with the current focus on making Upwork the preeminent destination for AI talent and work; second, improving customer productivity, engagement, and work outcomes in our products by infusing AI-powered features and user experiences built on Uma, Upwork's Mindful AI; third, our continued expansion into our enterprise TAM through the right products, partnerships, and integrations; fourth, acquiring new clients cost-effectively and at scale by launching new distribution channels" --- (UPWK, earning call, 2024/Q2)

"Just to give you a sense of performance for our new vertical business. I mean, grocery, Tony touched on this earlier, that business is growing at 100% year-on-year, with the fastest growing, we're gaining share." --- (DASH, earning call, 2024/Q1)

"So again, business trends remain strong. But what that caused from a performance standpoint is you saw a bit higher profitability from mobility in Q1, which will on a sequential basis be down in Q2 because we are we're not repeating that action of holding back on investment." --- (UBER, conference, 2024/05/30)

Economic Conditions Impact

Economic conditions, such as the inability to raise capital and inflation, significantly impact gig economy companies like Airbnb, Upwork, and DoorDash, affecting their financial health and operational capabilities. Additionally, Uber anticipates potential downturns in mobility bookings and profitability during recessions.

"If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be materially adversely affected." --- (ABNB, sec filing, 2024/Q1)

"The inability to raise additional capital as and when required would have an adverse effect, which could be material, on our results of operations, financial condition, and ability to achieve our business objectives. Commitments and Contingencies" --- (UPWK, sec filing, 2024/Q2)

"If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected. The following table summarizes our cash flows for the periods indicated:" --- (DASH, sec filing, 2024/Q2)

"What would you expect to happen for mobility if we do have a recession or a bigger downturn as far as maybe trade down or looking for lower priced rides, the impact on bookings and profitability? Then Prashanth, maybe you could talk about--it looks like you’ve turned the corner on independent contract deals in Massachusetts and other areas." --- (UBER, earning call, 2024/Q2)

"Inflation impacts demand on the small business and consumer side. And these both impact GSV, and they have compounding effects, right over time." --- (UPWK, earning call, 2024/Q2)

Strategic Responses

Uber's strategic responses to economic uncertainty include exiting non-dominant markets, optimizing asset utilization, and holding equity stakes in other companies, despite the associated volatility.

"are strong, we are not having to buy our way into strong volumes, we’re kind of earning our way into strong volumes, and I think the fundamentals are going to be there for some time to come. In terms of our portfolio, we had made the strategic decision a few years ago, probably three or four years ago to exit markets that we didn’t think we could either be the number one or number two, and if we’re the number two, the ability to move to a number one position." --- (UBER, earning call, 2024/Q2)

"From a strategic angle, what is our approach here? We have very high conviction that as these expensive assets are introduced, what is going to be important for the owner of these assets is to drive utilization." --- (UBER, conference, 2024/05/30)

"So I think that's in the that is in the very near future. One of the challenges that I think Uber brings is we are very comfortable holding equity stakes in other companies for strategic reasons and those equity stakes do create some volatility." --- (UBER, conference, 2024/05/30)

Regulatory Challenges

Gig economy companies like Uber and DoorDash are proactively addressing regulatory challenges by investing in legal frameworks, advocating for supportive labor laws, and managing costs related to worker classification and tax issues. They emphasize the importance of flexibility for workers while navigating evolving regulations and technological advancements.

"And then more recently, we've really increased our investments in going being more on the front foot in a regulatory way to help improve some of the laws that are around that make us maybe a larger target than we should be for tort law." --- (UBER, conference, 2024/05/30)

"And really, it reflects even what we thought 10 years ago when we started forecasting what might be true in regulatory, in particular on the labor piece across the world, which is I think in the majority of the world, the overwhelming majority, most jurisdictions want to actually support us in giving Dashers what they want, which is the flexibility of a work opportunity that’s never existed before and also protections that we believe they deserve." --- (DASH, earning call, 2024/Q2)

"Legal, tax, and regulatory reserve changes and settlements Legal, tax, and regulatory reserve changes and settlements are primarily related to certain significant legal proceedings or governmental investigations related to worker classification definitions, or tax agencies challenging our non-income tax positions." --- (UBER, sec filing, 2024/Q2)

"That said, we did absorb a meaningful amount of cost in the quarter. Look, I mean, our approach to regulatory markets has not changed." --- (DASH, earning call, 2024/Q1)

"Obviously, there has to be a regulatory framework to put in place. And as the technology develops, we think that actually you're not going to make a jump from one tech -- human drivers fully to AV." --- (UBER, earning call, 2024/Q1)

Investor Sentiment

Investor sentiment towards gig economy stocks is bolstered by companies like Upwork and Uber, which emphasize strong market positions, innovation, and sustainable growth. Upwork highlights its profitability and shareholder returns, while Uber projects significant growth and financial performance, despite acknowledging short-term stock price volatility.

"We are at the forefront of the future of work. Our business model and our position as a market leader mean that we can invest in innovation, achieve ongoing profitability gains and produce adjusted free cash flow to fund our business while driving strong shareholder returns." --- (UPWK, earning call, 2024/Q1)

"At a recent investor update, we outlined how over the next 3 years we expect to deliver gross bookings CAGR of mid to high teens and adjusted EBITDA CAGR from the high 30s to 40% with 90% or more annual free cash flow conversion. We see this as a business that can sustain industry leading growth at huge scale while continuing to drive substantial operating leverage to the bottom line." --- (UBER, event transcript, 2024/05/06)

"I'm a big investor just like you're a big investor, so I absolutely believe. But the stock price on a short term basis or a medium term basis is out of our control." --- (UBER, event transcript, 2024/05/06)

"The frequency in Brazil is a really impressive number that also I think is a great metric for how we have confidence as we continue to feed more markets and continue to expand our mobility products’ availability, reliability into more geographies.That’s going to continue to provide runway, and that sort of links into your second question, which is as we think about balancing supply and demand, I would say the overall sentiment at a global level today is that supply is in a better position than it has historically been." --- (UBER, earning call, 2024/Q2)

Competitive Landscape

DoorDash and Uber both highlight the intense competition in the gig economy, with DoorDash noting stability in the competitive landscape and confidence in their position, while Uber emphasizes the profitability struggles of competitors globally and the fierce competition in specific markets like Taiwan.

"On the second question, I mean, to be candid, we haven’t really seen much change in the competitive landscape." --- (DASH, earning call, 2024/Q2)

"Taiwan is a fiercely competitive market, where online food delivery platforms today still represent just a small part of the food delivery landscape." --- (UBER, press release, 2024/05/13)

"Sometimes competitive dynamics are an advantage. Just walk us through, like, how should we think about the different countries and how you're managing the international portfolio, just to make sure that all the markets that you're in can actually get to profitability over time." --- (DASH, earning call, 2024/Q1)

"In the competitive space, you look sort of around the world and majority of our competitors are struggling with profitability, fairly profitable or relatively low levels of profitability." --- (UBER, conference, 2024/05/30)

"I feel really strong about our position, irrespective of activity. But I think it’s always been competitive." --- (DASH, earning call, 2024/Q2)

Future Outlook

Upwork is optimistic about 2024, projecting increased revenue and adjusted EBITDA due to strategic investments and operating leverage. Uber is focusing on climate change, electrification, and safety, aligning with stakeholder interests to shape its future. Upwork's financial commitments also indicate a structured approach to future growth.

"Our unwavering focus on increasing operating leverage while investing in future growth is allowing us to raise our 2024 outlook for both revenue and adjusted EBITDA." --- (UPWK, earning call, 2024/Q1)

"Now there are many, many areas, but three areas of responsibility as we work locally that I would name are climate change and electrification, future of work and safety. And what's key here is for us to work closely with local constituencies, interest groups, regulators to make sure that the direction that we're taking in these three areas matches the direction of our stakeholders and we take the input of stakeholders as we move in these directions." --- (UBER, event transcript, 2024/05/06)

"Commitments and Contingencies Our principal commitments consist of the Notes, future purchase commitments for cloud infrastructure and other services of $20.0 million for each of the twelve months ending June 30, 2025 and 2026, and obligations under our non-cancellable operating leases for office space." --- (UPWK, sec filing, 2024/Q2)