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The gig economy is a modern workforce phenomenon that has taken the world by storm, and it’s revolutionizing how we think about work. With the rise of technology and online platforms, the traditional 9-to-5 job is no longer the only option.

Millennials and Gen Zers are drawn to the gig economy for its flexibility and independence. The gig economy offers flexible, independent and remote work opportunities, empowering individuals to become their own bosses and unlock new income streams.

The SoFi Gig Economy ETF (GIGE) offers exposure to companies powering the freelance revolution. As of mid-2024, it boasts a diverse portfolio of 78 holdings, balancing large-cap stability (53.22%) with small-cap growth potential (23.16%). While its 0.34% annual dividend yield is modest, GIGE aims to capitalize on the expanding gig economy infrastructure.

Key Takeaways:

• The gig economy is here to stay and will continue to disrupt traditional industries, creating new investment opportunities.
• Fiverr, Uber, Upwork, DoorDash, and Lyft are well-positioned to benefit from the growing demand for flexible work and digital services.
• Investors should consider the gig economy as a strategic addition to their portfolios, capitalizing on the changing nature of work and consumer behavior.

What is the Gig Economy?

The gig economy refers to a free market where temporary positions are common and organizations and independent workers engage in short-term contracts or freelance work instead of long-term, permanent jobs. This model often involves technology platforms that facilitate the connection between clients and workers, making it easy to find and manage gigs.

In the gig economy, individuals have the freedom to choose when, where, and how they work. They can set their own rates, work for multiple clients, and take on as much or as little work as they desire. This flexibility has led to a significant shift in how people view their careers, with many embracing the opportunity to be their own bosses.

Gig Economy Market Growth:

• The gig economy’s global market, valued at $355 billion in 2021, is projected to surge to $1.86 trillion by 2031. This impressive growth trajectory represents a robust 16.18% annual compound growth rate. businessresearchinsights

Performance Comparison of Top Gig Economy Stocks

5 Best Gig Economy Stocks to Buy in 2024

The companies we have listed are based on hedge fund interest, using data from Insider Monkey’s Q2 2024 report.

1. Fiverr International Ltd. (FVRR)

Number of Hedge Fund Holders (Q2 2024): 19

Fiverr is an online marketplace that connects businesses with freelancers offering digital services in over 500 categories, including graphic design, programming, and marketing. Founded in 2010, Fiverr has revolutionized the way businesses outsource their digital needs, providing a transparent and cost-effective platform.

Fiverr’s Q2 2024 results demonstrate resilience amid market volatility. Revenue reached $94.7 million, up 6% year-over-year, while Adjusted EBITDA hit $17.8 million, an 18.9% margin. The company’s focus on expanding customer wallet share and increasing take rate to 33.0% proved effective, despite active buyers declining 8% to 3.9 million.

Fiverr launched new offerings, including a profession-based catalog and long-term talent hiring capabilities. These additions aim to broaden Fiverr’s addressable market. The acquisition of AutoDS introduces a subscription-based software business, enhancing services for creators and adding a durable revenue stream with growth potential.

According to insidermonkey, Engine Capital, led by Arnaud Ajdler, has invested approximately $19.1 million in Fiverr International Ltd. (FVRR), purchasing 814,294 shares of the company’s stock.

Despite challenges in the SMB and freelancer space, Fiverr maintains its full-year 2024 guidance of $383.0 – $387.0 million in revenue. The company plans to optimize capital allocation and drive free cash flow growth over the next three years, demonstrating commitment to shareholder value. Q2 free cash flow increased 12.5% to $20.7 million.

According to Wall Street Analyst on FVRR stock. Of the 11 analysts following the stock, 7 give it a Buy and 4 has it at Hold.

Why We Picked Fiverr:

Fiverr stands out as a top pick due to its robust growth trajectory and innovative approach to the freelance marketplace. The company’s focus on expanding its service categories and moving upmarket with Fiverr Business shows a clear path for future growth. Additionally, Fiverr’s strong brand recognition and user-friendly platform give it a competitive edge in attracting both freelancers and clients. With the increasing trend towards remote work and the gig economy, Fiverr is well-positioned to capitalize on this shift in the labor market.

2. Uber Technologies, Inc. (UBER)

Number of Hedge Fund Holders (Q2 2024): 147

Uber is a household name and a pioneer in the gig economy. The company revolutionized the ride-sharing industry and has since expanded into other verticals, including Uber Eats (food delivery), Uber Freight (logistics), and various mobility offerings like scooters and bikes. Uber operates in over 10,000 cities worldwide.

Uber’s Q2 2024 results highlight the gig economy’s robust growth, with gross bookings surging 19% year-over-year to $40 billion and revenue climbing 16% to $10.7 billion. The platform’s user base expanded to 156 million monthly active consumers, a 14% increase, while trips grew 21% to 2.8 billion, averaging 30 million daily.

Drivers and couriers earned a record $17.9 billion, up 19% year-over-year, underscoring the gig economy’s income potential. Uber’s diversification is evident in its advertising revenue exceeding a $1 billion run-rate and the expansion of Uber One membership to 28 countries, demonstrating how gig platforms are evolving beyond basic services.

According to insidermonkey, Altimeter Capital Management, led by Brad Gerstner, holds 13.5 million shares of Uber Technologies, Inc. (UBER). The value of this stake is approximately $982 million.

The company’s investments in safety features, electrification efforts (planning to add 100,000 electric vehicles), and partnerships with traditional retailers like Costco illustrate how gig economy players are adapting to societal trends and consumer demands. Uber’s adjusted EBITDA of $1.6 billion, up 71% year-over-year, reflects the financial health of well-established gig economy platforms.

According to Wall Street Analyst on UBER stock. Of the 53 analysts following the stock, 42 give it a Buy and 6 has it at Hold.

Why We Picked Uber:

Uber’s position as a market leader in multiple gig economy segments makes it a compelling choice for investors. The company’s ability to diversify beyond ride-sharing into food delivery, freight, and potentially autonomous vehicles demonstrates its adaptability and growth potential. Uber’s massive scale and data advantages provide a moat against competitors. Furthermore, the company’s progress towards profitability and its strong brand recognition globally make it a standout pick in the gig economy space.

Before Buying the stock you might want to check our long term prediction for Uber.

3. Upwork Inc. (UPWK)

Number of Hedge Fund Holders (Q2 2024): 28

Upwork is a leading freelance talent marketplace, connecting businesses with independent professionals across various industries, including IT, marketing, design, and customer service. With over 5 million clients and 18 million freelancers, Upwork is a go-to platform for remote work and project-based engagements.

The gig economy’s momentum is evident in Upwork’s Q2 2024 results, boasting a 15% year-over-year revenue growth to $193.1 million and a record net income of $22.2 million. With 868,000 active clients, up 6% from the previous year, the platform showcases the increasing demand for freelance talent.

AI-related work is driving significant growth, with GSV in this sector up 67% year-over-year. Freelancers engaged in AI projects earned 47% more per hour than those in non-AI work, highlighting the gig economy’s adaptability to emerging technologies. The number of clients engaging in AI-related projects grew 50% year-over-year.

According to insidermonkey, Ancient Art (Teton Capital), managed by Quincy Lee, invested approximately $79 million in Upwork Inc. (UPWK). Their stake consists of about 7.3 million shares in the company.

Upwork’s expansion is further evidenced by its 75% year-over-year growth in ads and monetization products. The addition of 46 new Enterprise clients and partnerships covering over 60% of businesses using VMS platforms underscores the gig economy’s increasing integration into traditional business structures. With a projected full-year revenue of $735-745 million, Upwork exemplifies the sector’s robust growth potential.

According to Wall Street Analyst on UPWK stock. Of the 9 analysts following the stock, 7 give it a Buy and 2 has it at Hold.

Why We Picked Upwork:

Upwork earns its place on our list due to its strong position in the professional freelance market. The company’s focus on higher-value, longer-term projects sets it apart from competitors and potentially leads to better retention rates for both clients and freelancers. Upwork’s expansion into enterprise solutions opens up a significant market opportunity. As businesses increasingly turn to flexible talent solutions, Upwork is well-positioned to benefit from this trend, making it an attractive investment in the gig economy sector.

4. DoorDash, Inc. (DASH)

Number of Hedge Fund Holders (Q2 2024): 67

DoorDash is a leading food delivery platform, connecting customers with local restaurants and stores. With operations in the US, Canada, and Australia, DoorDash has a vast network of over 240,000 merchants and has completed over $100 billion sells for merchants, since 2013. The company also offers DashMart, its own convenience store, and DoorDash Drive, a white-label delivery service for businesses.

DoorDash’s Q2 2024 results show robust growth, with Total Orders reaching 635 million (up 19% Y/Y), Marketplace GOV hitting $19.7 billion (20% increase Y/Y), and revenue climbing to $2.6 billion (23% rise Y/Y). Net Revenue Margin improved to 13.3% from 13.0% in Q2 2023, while Adjusted EBITDA surged to $430 million from $279 million.

The company expanded its U.S. merchant base and enhanced user experience, leading to double-digit Y/Y growth in monthly active users for June. DoorDash improved its new verticals marketplace, reducing Dasher cost efficiency compared to both Q2 2023 and Q1 2024, while achieving record MAU penetration.

According to insidermonkey, Viking Global, led by Andreas Halvorsen, holds 5.54 million shares of DoorDash, Inc. (DASH). The value of this position is approximately $602.2 million.

Internationally, DoorDash has expanded to four countries and 500+ cities post-Wolt merger. Six-month consumer retention in most major international markets matches or exceeds U.S. levels. The company gained category share year-over-year in the majority of its international locations as of June, according to third-party data.

According to Wall Street Analyst on DASH stock. Of the 45 analysts following the stock, 25 give it a Buy and 17 has it at Hold.

Why We Picked DoorDash:

DoorDash’s dominant position in the U.S. food delivery market and its successful expansion into new verticals like grocery and convenience store delivery make it a top pick. The company’s advanced logistics technology gives it an edge in efficiency and customer satisfaction. DoorDash’s ability to maintain growth even as pandemic-related restrictions eased demonstrates the staying power of its business model. With potential for international expansion and further diversification of services, DoorDash presents an exciting opportunity in the gig economy space.

Before Buying the stock you might want to check our long term prediction for DoorDash.

5. Lyft, Inc. (LYFT)

Number of Hedge Fund Holders (Q2 2024): 53

Lyft is a ride-sharing giant and Uber’s main competitor in North America. The company offers a range of mobility options, including shared rides, bikes, scooters, and rental cars. Lyft has a strong presence in the US and Canada.

Lyft is a pure-play investment in the ride-sharing space, a sector with strong growth potential as individuals move away from car ownership and towards shared mobility. The company has a strong brand and a loyal customer base, particularly among millennials and Gen Zers. Lyft has also been focused on improving its cost structure and path to profitability.

Lyft reported impressive Q2 2024 results, marking its first quarter of GAAP profitability. The company achieved record-breaking active riders (23.7 million) and rides (205 million), with gross bookings up 17% year-over-year to $4.0 billion.

Revenue surged 41% to $1.4 billion, while net income reached $5.0 million, a significant improvement from the $114.3 million loss in Q2 2023. Adjusted EBITDA more than doubled to $102.9 million, with free cash flow turning positive at $256.4 million.

According to insidermonkey, Appaloosa Management LP, led by David Tepper, holds a $112.3 million stake in Lyft, Inc. (LYFT). Their investment comprises approximately 8 million shares of the ride-sharing company’s stock.

Lyft’s success extended beyond financials, with driver hours hitting an all-time high and strong performance during Pride celebrations and college graduations. The company also saw substantial growth in Canada, with Toronto becoming its 8th largest market.

According to Wall Street Analyst on LYFT stock. Of the 43 analysts following the stock, 13 give it a Buy and29 has it at Hold.

Why We Picked Lyft:

While Lyft faces stiff competition, particularly from Uber, it earns a spot on our list due to its strong focus on the North American market and its efforts to diversify into other mobility services. The company’s investments in improving operational efficiency and its path towards profitability make it an interesting prospect. Lyft’s expansion into bike and scooter sharing, as well as its investments in autonomous vehicle technology, show potential for future growth. As urban transportation continues to evolve, Lyft’s strategic positioning in the mobility sector of the gig economy could lead to significant upside potential.

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Conclusion

The gig economy represents a significant shift in how we work and do business, offering exciting opportunities for investors. The five stocks we’ve highlighted – Fiverr, Uber, Upwork, DoorDash, and Lyft – are well-positioned to benefit from the continued growth of this sector.

FAQs

1. What is the gig economy, and why is it important for investors?

The gig economy refers to a free market system where temporary, flexible jobs are commonplace, and individuals or businesses engage in short-term contracts or freelance work. It’s important for investors because it represents a significant shift in the global workforce, creating new investment opportunities in disruptive companies.

2. How has the gig economy grown and evolved?

The gig economy has experienced exponential growth in recent years, driven by technological advancements and changing societal preferences. The rise of online platforms and mobile apps has made it easier for individuals to find gig work and for customers to access services. The gig economy has also expanded beyond ride-sharing and delivery services to include a wide range of skills and industries, such as freelance writing, programming, and design.

3. What are the key benefits of investing in the gig economy?

Investing in the gig economy offers several advantages, including market growth and resilience, diversification, and long-term potential. The gig economy is disrupting traditional industries and creating new ones, providing investors with opportunities to back innovative companies. Additionally, the gig economy’s flexibility appeals to millennials and Gen Zers, ensuring a sustained demand for these services.

4. How do network effects play a role in the gig economy?

Network effects are powerful in the gig economy. As more users join a platform (whether they are clients or workers), the value of the platform increases for all participants. This creates a virtuous cycle, attracting even more users and making it challenging for new entrants to compete. Companies like Fiverr and Upwork benefit from strong network effects, which can lead to sustainable competitive advantages.

5. What are the risks associated with investing in the gig economy?

While the gig economy presents attractive investment opportunities, there are also risks to consider. These include regulatory and legal challenges, as the gig economy often blurs the lines between employee and independent contractor. Additionally, some gig economy companies may face intense competition, and their path to profitability may be uncertain.