Gig Economy Stocks: Resilience Amid Recession Concerns

Current performance of gig economy stocks

Uber, DoorDash, Airbnb, and Upwork are demonstrating strong performance in the gig economy. Uber highlights its countercyclical platform and profitability, DoorDash reports solid financial metrics, Airbnb emphasizes successful restructuring, and Upwork showcases profitability gains and shareholder returns.

"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)

"EBITDA Q3 $19.4 billion - $19.8 billion $470 million - $540 million Based on our current outlook and assuming a stock price in line with recent trading levels, we expect: 2024 stock-based compensation to be in a range of $1.1 billion to $1.2 billion, 2024 RSU issuances of 6.0 million to 7.0 million, net of expected forfeitures, and 2024 depreciation and amortization expense of approximately $560 million to $590 million." --- (DASH, press release, 2024/08/01)

"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)

"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)

"hard for competitors now to sort of catch up with the investments we've made because we've now been able to even move to profitability where we're able to keep funding more and more investment in that space and launching new products like we did in our go get 2 weeks ago here in New York that is creating, I think, a wider and wider moat." --- (UBER, conference, 2024/05/30)

Demand trends for gig economy services

Supply growth is outpacing demand in the gig economy, leading to lower prices (ABNB). Companies are seeing lighter usage in some areas (UPWK), but improvements in service and affordability are making offerings more compelling (UBER). The economic impact and consumer love for these services remain strong (DASH).

"And I think that trend line is going to continue given all of our efforts. And maybe the only other thing I'll just say on this is, as we know, loss of supply and demand, as supply grows faster and demand prices go down a little bit." --- (ABNB, earning call, 2024/Q1)

"On your question in terms of the take rate trend, yes, I mean I think we're just being prudent, again anticipating the trends that we're seeing, and just looking at top-of-funnel trends, both on the demand side as well as this mix shift, and expecting that we'll see a little bit lighter usage in some of the ads products as well." --- (UPWK, earning call, 2024/Q2)

"Typically what we see is improvement in driver supply. As driver supply improves, surge comes down, ETAs improve, the service itself becomes more compelling, and as a result volumes typically turn out to be quite sticky. In addition to those trends, we are actively investing in affordability, right - the membership program essentially brings prices down for both mobility and delivery, and we’re investing in products such as two-wheelers and three-wheelers and UberX Share, all of whom provide discounts of, let’s say, 25% to 50% of, let’s say, the price of an UberX as well." --- (UBER, earning call, 2024/Q2)

"I mean, why wouldn't you? I mean, think about the billions of dollars or tens of billions of dollars that you're adding to the local economic GDP or the fact that you're offering a service that consumers love and a place where anyone can really earn extra income on their own time." --- (DASH, earning call, 2024/Q1)

"And then I would say third, relevant to our recent quality initiatives, we see it as an opportunity for, as supply growth is stronger than demand growth, for us to continue to be driving quality." --- (ABNB, earning call, 2024/Q1)

Cost management and operational efficiency

Gig economy companies like DoorDash, Upwork, Uber, and Airbnb are focusing on cost management and operational efficiency. DoorDash excludes non-core costs to better reflect performance, Upwork reduced operating expenses as a percentage of revenue, Uber improved advertising and operational costs, and Airbnb efficiently manages supply acquisition costs.

"— (83) — (83) Allocated overhead from cost of revenue, sales and marketing, and research and development 19 21 38 40 Adjusted general and administrative $ 211 $ 239 $ 411 $ 459 (1) We exclude certain costs and expenses from our calculation of adjusted general and administrative expense because management believes that these costs and expenses are not indicative of our core operating performance, do not reflect the underlying economics of our business, and are not necessary to operate our business." --- (DASH, sec filing, 2024/Q2)

"Non-GAAP operating expense was $112.2 million in the second quarter, representing 58% of revenue compared to $115.7 million or 69% of revenue in the prior year as we continue to successfully reduce operating costs." --- (UPWK, earning call, 2024/Q2)

"We’ve got great improvements in advertising - I think we mentioned in the prepared remarks that’s now running in excess of a billion dollars on a run rate basis, and continuing to find ways, both operationally and with tech, to reduce some of our other costs like refunds and appeasements, which are still a bit of a drag on the delivery segment. You know, the fact that we were able to grow delivery profitability while continuing to have very strong growth in grocery really is a good indicator of how much strong growth we’re seeing in that profitability." --- (UBER, earning call, 2024/Q2)

"And so, it's really just the cost of acquisition of supply and that's not very expensive because we've found that we can do it fairly efficiently." --- (ABNB, earning call, 2024/Q2)

"(19) (35) Transaction-related costs (1) — Allocated overhead from cost of revenue, sales and marketing, and research and development 19 19 Adjusted general and administrative $ 200 $ 220 (1) We exclude certain costs and expenses from our calculation of adjusted general and administrative expense because management believes that these costs and expenses are not indicative of our core operating performance, do not reflect the underlying economics of our business, and are not necessary to operate our business." --- (DASH, sec filing, 2024/Q1)

Regulatory impacts on gig economy companies

Regulatory impacts on gig economy companies have led to increased costs and uncertainties. DoorDash and Uber face significant financial and operational challenges due to regulatory developments, legal settlements, and health and safety reporting issues. Airbnb also experiences headwinds from regulatory changes, particularly in North America.

"This was part of the reasoning I mentioned, causing H3 to be higher than H1, where we’re seeing impact from regulatory costs continue to reduce, as well as the volume continues to grow, as well as the gross profit for the various lines of business continue to grow as we go through the rest of the year. John Colantuoni: Thanks so much." --- (DASH, earning call, 2024/Q2)

"Currently, it is not possible for investors, the company and its stakeholders to assess if management is effectively managing this issue as the current safety report A, lease out critical metrics, for example, non fatal physical assault that severely impact life are not included B, only addresses the U. S. Market and C, is not fully independent. We filed this resolution for the 2nd year in a row because we have not seen progress regarding health and safety reporting and because the Civil Rights assessment that was published in August 2023 did not include health and safety experts and focused exclusively on the U. S. Market." --- (UBER, event transcript, 2024/05/06)

"And so, the LTS to growth rate is a drag on the average that has an outsized impact on North America and we've just comped with the changes that we made a year ago in terms of our LTS fees which is a bit of a headwind for LTS generally on the platform, but in particular in North America The one other thing I would add in terms of just providing some color on what's happening in the US is couple of regulatory comments." --- (ABNB, earning call, 2024/Q2)

"Periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including risks and uncertainties related to: competition, managing our growth and corporate culture, financial performance, investments in new geographies, products, or offerings, our ability to attract merchants, consumers, and Dashers to our platform, legal proceedings and regulatory matters and developments, any future changes to our business or our financial or operating model, and our brand and reputation." --- (DASH, press release, 2024/05/01)

"These items include, but are not limited to, significant legal settlements, unrealized gains and losses on equity investments, tax and regulatory reserve changes, restructuring costs and acquisition and financing related impacts." --- (UBER, press release, 2024/08/06)

Competitive landscape in the gig economy

DoorDash executives indicate that the competitive landscape in the gig economy has remained relatively stable. They emphasize the importance of competitive dynamics, particularly in international markets, and highlight the need to focus on building superior products to achieve high retention and frequency levels.

"On the second question, I mean, to be candid, we haven’t really seen much change in the competitive landscape." --- (DASH, earning call, 2024/02/28)

"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)

"And I think remembering that as simple as it sounds is actually quite important, because I think there’s always a lot of competitive activities in our space, but I think that making sure that you can win on building the best product as measured by the highest retention and frequency levels." --- (DASH, earning call, 2024/Q2)

Future outlook for gig economy stocks

Uber anticipates 18% to 23% YoY growth in Q3 2024, reflecting strong future prospects. Upwork plans potential capital raises and has executed a $100 million stock buyback, indicating strategic financial management. These actions suggest a positive future outlook for gig economy stocks.

"Outlook for Q3 2024 For Q3 2024, we anticipate: Gross Bookings of $40.25 billion to $41.75 billion, which represents 18% to 23% YoY growth on a constant currency basis." --- (UBER, press release, 2024/08/06)

"In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements as we did with the offering of the Notes." --- (UPWK, sec filing, 2024/Q2)

"We just bought back $100,000,000 of stock in the past few months. And so we are going to be continuing to look at options with our balance sheet." --- (UPWK, conference, 2024/05/14)

Consumer behavior shifts

Consumers in the gig economy are becoming more discerning, preferring shorter booking windows and personalized experiences (ABNB). Companies like DoorDash and Uber are responding by increasing selection, reducing costs, and improving quality (DASH, UBER). This shift highlights a growing demand for tailored, cost-effective services.

"And when you think about what that shift looks like, how much of that do you think in terms of a shortening booking window are elements of demand-driven Dynamics where the consumer might want to spend less money and be more discerning." --- (ABNB, earning call, 2024/Q2)

"And so I think it's going to come down to what consumers prefer. We obviously are going to work on a model in which we can increase the amount of selection that we offer, reduce the cost in which that selection is made available, and improve the quality of the process." --- (DASH, earning call, 2024/Q1)

"that our selection’s improving, we’re also driving down consumer promotions and continuing to add more and more merchants onto the platform - we mentioned Costco, and I think in the press release or prepared remarks, we also mentioned a couple other grocers. All in all, things are on track to where we gave you in our three-year model, and grocery is continuing to be a strong story for our delivery business." --- (UBER, earning call, 2024/Q2)

"And then third is personalization, knowing something about the consumers such that you are not just barraging them with anything that's available in a particular market, but merchandising to them, the things that they would actually enjoy and are relevant for both them personally, but also the travel use case that" --- (ABNB, conference, 2024/05/30)

"we’ve kind of heard. And I think that whether you look at new customer acquisition, you look at existing behavior, you still see that, at least in the eyes of the consumer, they seem to really prefer DoorDash." --- (DASH, earning call, 2024/Q2)