Shares of freelance work website Upwork (NASDAQ:UPWK) stock jumped as much as 12% in early trading Tuesday before giving back half their gains and retreating to about a 5.9% profit as of 2:45 p.m. EDT.
Why did Upwork go up — and then go back down a bit? In the absence of any other news, my best guess is that investors are placing their bets on how they think Upwork will do when it reports its Q2 2021 financial results, which are due out just a couple weeks from now, on July 29.
And if that’s what’s happening, then I suspect investors may be on to something today.
Consider: According to the latest analyst estimates published by Yahoo! Finance, Wall Street is forecasting a $0.09 per share loss for Upwork in Q2 — flat against the $0.09 per share that Upwork lost in the year-ago quarter.
And yet, in none of the last three quarters has Upwork come anywhere near losing $0.09 per share. To the contrary, each of the past three quarterly reports showed Upwork improving over previous-year results — even earning a positive GAAP net profit in Q4 2020.
None of this suggests, to my mind, that Upwork is likely to do as badly in Q2 2021 as it did in Q2 2020 — much less that the stock might miss expectations. To the contrary, in the absence of any bad news that would suggest a sudden collapse in earnings, it seems to me that the odds favor Upwork beating earnings two weeks from now. And if that’s the way things play out, smart investors will want to be buying Upwork ahead of earnings — which not coincidentally, seems to be exactly what investors are doing today.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.