The reopening economy hasn't been kind to Fiverr International's (FVRR 3.74%) stock, even if its business has remained largely unaffected. Because Wall Street is skeptical about how this old-guard gig economy stock will fare if people return to the workforce en masse, the stock has lost 43% of its value in 2021, compared to a 27% gain by the S&P 500.
However, while Fiverr's business naturally slowed some from the breakneck pace it was setting during the lockdown period of the pandemic, it continues to expand rapidly and is now targeting international markets. And there doesn't seem to be any reason it won't still grow.
Yet helping you retire a millionaire is a tall order for any company, let alone one that's saddled with pessimism over how it will navigate a world economy that is returning (albeit at a glacial pace) to a sense of normalcy.
Let's dive into Fiverr International's potential and see what it will take for this freelance original to help you live a life of leisure in the future.
Image source: Getty Images.
Fiverr is still seeing significant growth. Third-quarter revenue was up 42% year over year to $74.3 million. The number of active buyers jumped 33% to 4.1 million as spending per buyer rose 20% from last year, hitting $234 versus $195 in 2020.
Although that was about half of the 88% surge in revenue it saw in the year-ago quarter, no one should have been expecting that kind of torrid pace to persist. Instead, this year's gains are right in line with what it saw in 2019, indicating that Fiverr hasn't lost its step at all. In fact, Fiverr is growing faster than it was prior to the COVID-19 outbreak.
Between 2017 and 2019, revenue was rising at about 41% annually -- yet through the first three quarters of 2021, it's up over 60%. The company expects to finish out the year with revenue up 54% to 56% from last year.
While some of that growth is due to acquisitions made, that detail only reinforces the notion that Fiverr is investing in its future and in growth opportunities.
While Fiverr did post a GAAP net loss of $14.3 million in the third quarter, wider than what it reported last year, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved to $7.3 million from $4.2 million.
Image source: Getty Images.
A better way to work
Instead of going through an agency or looking for someone on social networking platforms to fill a gig, you go on Fiverr. Sellers present their services as packages with set prices, which makes the process of contracting easy and efficient. That's one of the reasons Fiverr has demonstrated explosive success.
Although its name is derived from the fact that everything cost $5 when the company launched, today it's easy to find gigs priced over $1,000. And that's good for everyone involved -- Fiverr, the seller, and the buyer. It means there are a range of services and quality levels available, and the complexity of the services offered is increasing too.
As mentioned above, international expansion is an important part of Fiverr's future trajectory. That's demonstrated by its acquisition of global freelance creative network Working Not Working, which sources freelance creatives for the likes of Netflix, and Spotify. Like Fiverr itself, Working Not Working connects buyers with sellers of digital services, helping businesses find talent across various industries, like graphics, programming, marketing, and writing. The gig outfit also acquired CreativeLive and Stoke Talent to expand its total addressable market.
Fiverr estimates the total global freelance market to be $750 billion annually, while its U.S. addressable market is pegged at $115 billion per year.
Image source: Getty Images.
The best time ever for freelancing
Freelancing's popularity was already growing before the pandemic, and got a turbo boost during the lockdowns. While analysts may fret about the reopened economy, we're in the midst of what many are referring to as the Great Resignation, where large numbers of people who quit their jobs are not returning to the workforce. Earlier this year Microsoft (MSFT 1.82%) suggested as much as 40% of the global workforce is thinking of leaving their employer this year.
Businesses are finding it very difficult to fill positions, even for greatly elevated pay rates, which is why the labor nonparticipation rate, or those who've essentially dropped out of the labor market, stands at around 100 million,, or nearly 40% of the workforce. That's the highest level since the mid-1970s.
Not everyone is launching a freelance start-up, but the massive pool of potential freelancers is near its greatest levels in history.
Heading for Millionaire Acres?
As much caution as Wall Street is registering, they still see a path to greater growth for Fiverr. Analysts expect revenue will grow 35% annually through 2023, and they have set a one-year consensus price target of $216 per share, suggesting they see 94% potential upside in the stock.
That being said, Fiverr International isn't likely to help you become a millionaire on its own, as the freelance gig space is getting more crowded. Not only does it face competition from Upwork (UPWK 3.40%), but Microsoft is moving its LinkedIn subsidiary into this market.
Still, with its first-mover's advantage, Fiverr looks like a good stock to own. And as part of a diversified portfolio, it ought to help you achieve a comfortable retirement.
