Fiverr International (NYSE: FVRR) emerged as a breakout star over the past couple of years, with its stock making staggering gains. Its meteoric rise, soaring by a jaw-dropping 1,439% from its IPO price to a record high of $323.10, painted a rosy picture in 2020 and 2021. As the pandemic spurred demand for remote freelance workers, Fiverr thrived. However, as the world adjusted to post-pandemic norms, market conditions took a toll on its growth trajectory, leading to a significant drop in its valuation.
Detractors of Fiverr pointed to the potential threat posed by generative artificial intelligence tools, such as ChatGPT, to the demand for freelance workers in certain sectors. In addition, the company faced pressure from rising interest rates, puncturing its valuation bubble. Consequently, its stock price plummeted to about $29, prompting questions about its potential for revival and its ability to disrupt the labor market akin to the seismic impact of Amazon (NASDAQ: AMZN) on the retail sector.
Image source: Getty Images.
Is Fiverr’s Growth Ready to Take Flight Again?
Fiverr witnessed impressive revenue growth, with year-over-year increases of 45% (2018), 42% (2019), and 77% (2020). Its active buyer count swelled from 2.0 million at the close of 2018 to 3.4 million by the end of 2020, prompting bullish sentiments and a premium being placed on its stock. Yet, the company struggled to sustain its premium valuation as the market reverted to pre-pandemic behaviors. Its growth metrics dismal compared to previous years, signaling a drastic slowdown in its momentum through 2023.
Metric | 2020 | 2021 | 2022 | First 9 Months of 2023 |
|---|---|---|---|---|
Active buyers growth | 45% | 23% | 1% | 0% |
Annual spend per buyer growth | 21% | 18% | 8% | 4% |
Revenue growth | 77% | 57% | 13% | 6% |
Data source: Fiverr.
Fiverr projects a modest 6%-8% revenue increase for the full year, with analysts anticipating a 7% growth rate. Nevertheless, a turnaround could be on the horizon, with revenue expected to surge by 13% in 2024 and by 17% in 2025. These projections are notably robust for a stock currently trading at a meager 3 times next year’s sales.
According to Business Research Insights, the global gig economy could still expand at a compound annual growth rate (CAGR) of 16% from 2021 to 2031. If Fiverr aligns with Wall Street’s projections and sustains a CAGR of 16% from 2025 to 2030, it could potentially amass $1 billion in revenue by 2030.
Despite grappling with cyclical deceleration, Fiverr’s take rate, the share of each transaction it retains as revenue, continues to trend upward. Coupled with prudent spending habits, the company has witnessed a double-digit percentage surge in its adjusted EBITDA margins over the past year.
Metric | 2020 | 2021 | 2022 | First 9 Months of 2023 |
|---|---|---|---|---|
Take rate | 27.1% | 29.2% | 30.2 % | 31.3% |
Adjusted EBITDA margin | 4.8% | 7.7% | 7.2% | 16% |
Data source: Fiverr.
Fiverr anticipates an adjusted EBITDA margin of 16.3% for 2024, with analysts predicting a further rise to 21.3% by 2025. Furthermore, the company is expected to deliver stable profits on a generally accepted accounting principles (GAAP) basis in 2024 and 2025.
Can Fiverr Be the Next Amazon?
While Fiverr promises substantial growth, several factors are likely to impede its status as a transformative growth stock akin to Amazon. Firstly, Fiverr lacks dominion in the gig economy space, unlike Amazon’s unassailable position in e-commerce. It holds the third-largest market share, lagging behind Upwork and the esteemed invitation-only freelance platform OnSite. Overtaking Upwork to emerge as the “Amazon of gig workers” seems onerous, particularly when Upwork boasts twice the annual revenue of Fiverr.
Secondly, the transition to gig workers is not as seismic as the shift to e-commerce, which Amazon so astutely exploited. Finally, Fiverr still contends with macroeconomic uncertainties that cast a shadow on its resurgence and transformation into a game-changing stock on par with Amazon.