Freelance platform Fiverr International (FVRR -0.96%) was an outstanding stock in 2020, gaining 730%. But that performance didn't continue into 2021, despite healthy growth and huge market opportunities. Fiverr's share price tanked 44% in 2021, and it's already sliding in 2022. But things can change quickly in this market. Does this low price spell opportunity for investors in 2022?
Just a pandemic play?
Fiverr was a favorite in 2020 as work-from-home mandates made its services very attractive. Fiverr operates a platform connecting freelancers and buyers, but it's slightly different from other freelancing sites, which may make all the difference. It uses an e-commerce style model that it calls "service-as-a-product," where freelancers, or sellers, offer their services pre-packaged as "gigs." Each gig has an attached price and clear scope, making for a transparent and straightforward vetting process, as well as a higher likelihood of a successful project outcome.
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2020 revenue increased 77% year over year to $190 million, and net loss decreased from $33 million in 2019 to $14 million. Fiverr added more than 1 million new active customers and increased its take rate or its fees from each project.
2021 was far from a setback. It was a robust year, taking the pandemic ball and running with it to create a hold on its advancement and keep it going. In the third quarter, revenue increased 42% year over year, and active buyers increased 33% to 4.1 million. Spend per buyer and take rate also increased. Fiverr spent the year upgrading its game with acquisitions and new features, and it's well-positioned to post higher growth in 2022.
Opportunities abound
The case for Fiverr stock is pretty clear. Workers may be going back to the office, but many companies have become decentralized, allowing people to create their own, flexible schedules, and relying less on local resources while embracing outsourcing for many tasks and projects. That's where I see Fiverr's biggest opportunity.
Fiverr has beefed up its enterprise options, or what it calls Fiverr Business. This targets business accounts, which includes all different sizes of business, even large clients such as Unilever and Skechers. Fiverr offers many perks for business accounts, such as a unique, collaborative dashboard for multi-worker accounts and a dedicated success manager. In November, Fiverr acquired Stoke Talent, a talent management platform that helps companies manage their freelancers.
Why is this such an important development? It feeds into Fiverr's take rate, which is the way it generates revenue. The take rate increased to 28.4% in the third quarter, way above the industry average. For example, freelance website Upwork's third-quarter take rate was 14.2%. Large businesses, which have more capital at their disposal and a need for a robust service assortment, can pay more than individual buyers.
This focus also encourages higher spending, generating higher volume and more fees. Spend per buyer increased 20% year over year in the third quarter, from $195 last year to $234 in 2021.
Fiverr stock for 2022?
There are many other ways Fiverr can grow as well, capturing more of what it says is a $115 billion addressable market of freelancers, most of which is still offline.
It consistently upgrades its platform with new features and service categories, offering a more competitive user experience, and attracting new talent and buyers. This contributes to current users upgrading their accounts and spending more. It's also expanding its geographic footprint, launching in new countries and new languages.
Management is guiding for about 55% year over year in revenue growth for 2021, and it's showing no signs of slowing down. With the lowered stock price, shares trade at a trailing-12-month price-to-sales ratio of about 16. That's not cheap, but it's not unreasonable for growth stocks, which typically trade at a premium valuation.
Fiverr's still posting losses, which expanded in the third quarter year over year. That's due to its huge expansion efforts, but it's likely become profitable as it scales.
There's definitely risk involved, but Fiverr stock should rebound in 2022 and offer gains for investors.
