3 Gig Economy Stocks to Avoid After Judge Rules Prop 22 Unconstitutional Gig economy stocks were all the rage as companies could grow without much full-time staff. Most of their workers were part-time contractors, so compan...

Gig economy stocks were all the rage as companies could grow without much full-time staff. Most of their workers were part-time contractors, so companies didn't need to pay benefits. Now, that has changed. A judge recently ruled California Prop 22 was unconstitutional, which could mean bad news for stocks such as Uber Technologies (UBER), Lyft (LYFT), and DoorDash (DASH).

California Prop 22 has been ruled unconstitutional. Gig economy stocks are taking a hit as a result of the news. Though gig companies probably won't have to pay comprehensive benefits and provide the extent of niceties awarded to full-time in-house employees, the ruling of Prop 22 as unconstitutional certainly won't help the bottom line of gig businesses.

In plain English, the ruling noted above means the law that permitted companies to classify rideshare drivers as contractors instead of employees has been struck down. Prop 22, previously passed by voters in the fall, was deemed unenforceable and also unconstitutional. Gig companies had spent more than $200 million supporting the law.

Now that these companies are not exempt from treating drivers as official employees, the power pendulum has swung in favor of labor. Below, I provide a look at three gig stocks investors should avoid after the Prop 22 ruling. These stocks are Uber Technologies (UBER), Lyft (LYFT), and DoorDash (DASH).

Uber Technologies (UBER)

UBER went public in the spring of 2019 at $45. The company does business in the United States and abroad in Asia, the Middle East, Canada, Europe, and Latin America. UBER is now priced at $40.17. Its 52-week high is $64.05, while its 52-week low is $30.60. The stock has a beta of 1.55, which indicates it is 50% more volatile than the market.

UBER has an overall grade of C, which translates into a Neutral rating in our POWR Ratings system. The stock also has a grade of C in the Growth, Value, Momentum, and Quality components of the POWR Ratings. You can find out how the stock grades in the remainder of the components, including Sentiment and Stability, by clicking here.

Out of the 73 publicly traded companies in the Technology - Services industry, UBER is ranked 46th. Click here to find the top stocks in this industry. While analysts had relatively high price targets for the stocks, the latest news about Prop 22 may send those price targets down.

Lyft (LYFT)

LYFT, headquartered in San Francisco, has been in business for nearly a decade. The company didn't go public until 2019, starting at $72. Aside from providing a ridesharing service, the company makes money through its multimodal transportation networks. The stock is currently priced at $47.67. Its 52-week high is $68.28, while its 52-week low is $21.34.

LYFT has a beta of 2.31, which means it's more than twice as volatile as the market. The company has an overall grade of C and a Neutral rating in our POWR Ratings service. LYFT has grades of C in the Momentum, Sentiment, and Quality components. Click here to find out how LYFT grades in the rest of the components, including Value, Stability, and Growth.

Out of the 73 stocks in the Technology - Services industry, LYFT is ranked 42nd. Wall Street analysts' ratings match our POWR ratings as many rate the stocks a Hold. In the prior 35 weeks, the average broker recommendation for LYFT has worsened.

DoorDash (DASH)

DASH is a food delivery service provider. DASH is quite popular amongst millennials and Generation Z age cohorts, as it provides customers with on-demand food delivery. In particular, Gen Zers who have primarily shunned social norms and rites of passing, such as learning how to drive when turning 16, lean on DASH for the prompt delivery of tasty food.

DASH is currently priced at $187.45. Its 52-week high is $256.09, while its 52-week low is $110.13. Of the 42 stocks in the Internet - Services industry, DASH is ranked 37th. You can find the top stocks in this industry by clicking here.

DASH has an overall grade of D, translating into a Sell rating in our POWR Ratings system. The company has grades of D in the Value, Sentiment, Stability, and Growth components of the POWR Ratings. You can find out how DASH grades in the rest of the components, including Quality and Momentum, by clicking here.

UBER shares were unchanged in premarket trading Thursday. Year-to-date, UBER has declined -18.31%, versus a 20.73% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.

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