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Why Fiverr's Stock Dropped 24.8% Today

By Travis Hoium – Aug 5, 2021 at 2:31PM

Key Points

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The second quarter was great, but guidance left a lot to be desired for investors.

What happened 

Shares of online marketplace for freelancers Fiverr (FVRR -3.69%) dropped as much as 24.8% in trading on Thursday after reporting second-quarter 2021 financial results. Shares are down 23.2% at 1:45 p.m. EDT. 

So what

Results for the quarter were downright outstanding. Revenue jumped 60% compared to a year ago to $75.3 million, gross margin was an incredible 83.4%, and non-generally accepted accounting principles (GAAP) net income was $7.9 million, or $0.19 per share. Analysts were expecting revenue of $74.8 million and earnings of $0.14 per share. 

Person  with laptop working in a garden at home.

Image source: Getty Images.

Results looked great, so why is the stock down? The answer comes down to guidance. Management expects revenue in Q3 2021 to be $68 million to $72 million, down from Q2, and growth of just 30% to 38% versus a year ago. Management said the relatively weak results are the result of more normal business activity and less remote work, which is hurting the freelance market. 

Now what

This is a short-term hit to Fiverr, and it makes sense the stock is down big given the fact the company has a market cap of $6.3 billion and expects revenue of just $280 million to $288 million this year. That's a lofty price-to-sales ratio of 22 times at the midpoint of revenue guidance, which is a concern if revenue growth has stalled out. 

I still think Fiverr has a long growth runway ahead, but the company may need to absorb the impacts of companies going back to work over the next few quarters. That will make shares volatile, and if the stock keeps dropping, it could be a great buying opportunity for investors looking to jump into this long-term growth stock

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fiverr International. The Motley Fool has a disclosure policy.

Stocks Mentioned

Fiverr International Stock Quote
Fiverr International
$32.61 (-3.69%) $-1.25

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