UBS says buy Freelancer, and the stock is rallying

Shares in Matt Barrie’s Freelancer.com are up more than 7% in trade today after global investment bank UBS recommended the stock to clients.

Analysts Tim Plumbe and Aryan Norozi, in their first research note on the freelancing marketplace platform, gave the stock a 12-month price target of $1.85. It closed at $1.35 on Friday.

On the ASX today shortly before the close Freelancer shares were trading up more than 10% at $1.49.

UBS also says there is significant potential upside to its price target. Its investment thesis is based around the “huge” potential market for Freelancer as businesses look to digital platforms to commission certain types of work.

Here’s UBS:

Total blue sky addressable market for the Small Business and Consumer crowd-sourcing markets could be as large as $122b and $155b respectively. Our analysis suggests an immediate addressable market of at least $9.6b if we look at Small Businesses in selected regions, before taking multiple listings potential into account. Even just focussing on a narrow subsector of our selected regions – we estimate if every start-up Small Business posted just one job at birth, this could represent a $1.8b opportunity.

Plumbe and Norozi say they are expecting “an acceleration of the shift away from traditional white collar services and into an online environment” and point out that companies in Australia can commission creative work through Freelancer’s platform at a fraction of what it would cost in the domestic market. They that “upselling” companies on project work that commissioned through Freelancer represents a significant opportunity:

In our view a key area of upside comes from the Upsell products. Consider a basic transaction – We estimate a price differential of ~10:1 between engaging a white collar contractor in Australia vs engaging a FLN freelancer (ie $2000 worth of work in Australia will only cost $200 online). On top of this the employer pays a 3% commission to FLN (so $2000 vs $206). The differential is enormous – much like an online property ad vs a print ad 10 years ago.

More to come…

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