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BTIG analysts were positive on Upwork Inc. (NASDAQ:UPWK) after their firm learned the freelancing platform recently communicated to freelancers that it is retiring its sliding scale fee structure for freelancers.
According to the analysts, starting May 3, freelancers will be charged a flat 10% fee, with projects at the current 5% tier grandfathered through the end of 2023. In addition, Upwork will begin charging a client contract initiation fee of up to $4.95, effective April 26.
“We expect that replacing the current sliding scale tiered system with a flat 10% rate will be accretive to the overall take rate,” they said in a note to clients.
The analysts, who maintained a Buy rating and $20 per share price target on the stock, said their firm estimated the blended talent service fee was 7-8% in 2022, with the take rate within just the talent marketplace likely a bit below the corporate average. They also stated that the contract initiation fee is entirely new and should also be additive to the take rate.
“While take rate should come up nicely, these changes will also likely create GSV headwinds as they introduce new frictions into the marketplace,” noted the analysts.
“We believe the next few months could be especially choppy as freelancers who are displeased enough to leave the Upwork marketplace might try to reduce their activity while Upwork will not be getting the benefit of the higher fees.”
After speaking with Upwork, BTIG confirmed the changes are already contemplated in its FY23 guidance provided last month.
