Why Fiverr Is a Top Stock to Buy in 2022

With so many people quitting their jobs and transitioning into remote, hybrid, flexible, and/or freelance positions, it's a great time to be looking at companies that can support these trends while having durable staying power for an investor's portfolio. In this segment of Backstage Pass, recorded on Jan. 5, Fool contributor Trevor Jennewine explains why Fiverr (FVRR 0.25%) is an unstoppable stock for investors to buy right now. 

Trevor Jennewine: But I'm going to build on what we've been talking about with the gig economy. I'm going to go with, I don't know if it's my top company, but it's one of them. I'm going to go with Fiverr. I got a slide right here. I'm sure most of our viewers are familiar with Fiverr.

They're a key player in the gig economy. If you're not familiar with the company, they have a marketplace-style platform where they connect freelancers or sellers of digital services with businesses or the buyers of digital services. But it's more than that. They take a broader approach to address the whole freelancer life cycle.

For instance, there's Fiverr Workspace, which is a suite of back-office software that helps freelancers with task management. They also have Fiverr Learn, which is an online training platform where you can learn some new skills. One of the things I like that happened recently, is the company acquired Stoke Talent.

Stoke helps larger businesses manage their freelancer workforce. Its platform includes tools for onboarding freelancers, paying them, managing budgets. That move, I think benefits Fiverr in a few different ways.

First, it allows them to move upmarket. The traditional niche has been small and medium-sized businesses, but now they can start working with some of the larger enterprises.

Second, it allows them to work with businesses that already have a freelancer workforce in place. The platform is aimed at managing those freelancers. If they already have a freelancer workforce in place, they can still become a Fiverr customer.

Then there's obviously synergies with Fiverr's marketplace, if those companies need additional freelance workers, they can do that through Fiverr. One of the things that management pointed out around the time they made this acquisition, is that these tools can be used for the offline freelancer market as well, which is still orders of magnitude larger than the online market.

Fiverr puts its market opportunity around $115 billion right now. They have plenty of room to grow. Rachel just cited that study that they released last year.

With any marketplace-style business, you have a network effect. As you get more people selling digital services on the platform, that creates value for buyers and vice versa, as you get more businesses looking for freelancers, it creates value for the self-employed individuals on the platform. Fiverr strengthens that with some artificial intelligence.

They personalize the experience for businesses on the platform making recommendations using their AI engine. Over time, as they collect more data from seller profiles and transactions, theoretically the platform gets better at pairing businesses with gig workers that would benefit whatever project they're working on.

I think the company's financial performance is impressive. Revenue is up 42% over the past year. Particularly important, active buyers are up 33%. They're spending more. The spend per active buyer is up to $234. Now that's 20% higher.

But I think the big number is Fiverr's take rate is 28.4% in the most recent quarter, which is double Upwork's take rate. It's literally doubled what Upwork is able to take away from the platform. I think that just evidences the value Fiverr creates for people using the platform.

The company is also free cash flow positive, so I think there's a lot to like here. I don't know if it's my top stock, but I certainly think with the trends we've been talking about, and I know the rise of the gig economy that Fiverr stands to benefit.