Macroeconomic headwinds have weighed on the stock market this year. The S&P 500 is down 18% from its high, and the tech-heavy Nasdaq Composite has plunged 27%. Of course, no one likes to lose money, but the market rebounded from every downturn in the past, which makes the current situation a buying opportunity for patient investors.
With that in mind, Zoom Video Communications (ZM -1.40%) and Fiverr International (FVRR -4.11%) are 82% and 89% off their highs, respectively, but both stocks could soar in the coming years due to changes in the way people work. Here's what you should know.
1. Zoom Video Communications
Ark Invest believes that 832 million people will work remotely at least part-time by 2026, up 70% from 489 million in 2021. While Zoom has lost favor with investors after its spectacular fall from grace, the company is nevertheless well positioned to benefit from that trend.
Zoom's cloud platform unifies voice, video, chat, and event management solutions, streamlining communication and collaboration for businesses regardless of whether employees are in the office or working from home. Additionally, the company recently enhanced its cornerstone videoconferencing product, Zoom Meetings, with contact center and whiteboarding functionality.
One that note, Zoom Meetings is the most popular videoconferencing application on the market, according to the latest G2 Grid report. That means Zoom is already a recognizable brand for many businesses, and the company is using that competitive edge to drive adoption of adjacent products. For instance, Zoom Phone reached 3 million seats in the first quarter of fiscal 2023 (ended April 30, 2022), up from 2 million in September 2021.
Financially, Zoom delivered respectable results over the past year, though growth has decelerated substantially compared to the early days of the pandemic. The company saw its enterprise customer count rise 24%, and the average customer spent 23% more. That drove $4.2 billion in revenue, up 29%, and the company generated $1.5 billion in free cash flow (FCF). That works out to an impressive FCF margin of 35%.
Looking to the future, Zoom aims to further differentiate its platform with artificial intelligence (AI) services. The company recently introduced Zoom IQ for Sales, AI-powered software that helps sales teams work more productively by analyzing customer interactions to surface insights and automate workflows. That type of innovation should keep Zoom on the leading edge of the communications industry.
On that note, management puts its addressable market at $91 billion by 2025, leaving plenty of room for growth. And with Zoom trading at 7.3 times sales -- near the bottom of its historical range as a public company -- now is a good time to buy this stock.
2. Fiverr International
Fiverr operates a freelancer marketplace that connects buyers and sellers of digital services. Gig workers use that platform to list and market skills across hundreds of categories -- everything from video editing and graphic design to digital marketing and data analytics -- and businesses use the platform to source talent from around the world.
Fiverr has distinguished itself with a variety of value-added services, including freelancer tools for learning and development, task management, and marketing. Additionally, the company recently launched Togetherr, a platform that leans on artificial intelligence to build freelancer teams (from a vetted pool of highly talented gig workers) and match them with specific brand projects and campaigns.
In short, Fiverr supports its sellers throughout the entire freelancer lifecycle, and it streamlines the discovery process for businesses. That value proposition fueled solid financial results over the past year. Revenue climbed 41% to $316 million and FCF skyrocketed 121% to $38 million.
Turning to the future, Fiverr is focused on growing upmarket. It acquired Stoke Talent last November, adding tools that help large businesses manage online and offline freelancers. Stoke Talent's technology means Fiverr can offer services to businesses that already have a freelancer workforce, even if those freelancers were not contracted through the Fiverr marketplace. Additionally, by forming relationships with those businesses, Fiverr positions itself to benefit should they need additional freelancers in the future.
The Stoke Talent acquisition complements Fiverr Business, a platform that helps larger businesses find and collaborate with freelancers that are regularly vetted for high-quality service. On that note, Fiverr Business continued to gain momentum in the most recent quarter, as active accounts jumped 50% compared to the prior year.
In the long run, Fiverr's upmarket ambitions could have a big impact on the company. Large businesses typically have bigger wallets and better retention potential, according to management. That should help Fiverr capitalize more effectively on its $115 billion addressable market.
On that note, the stock currently trades at 4.3 times sales, a huge discount compared to its three-year average of 19 times sales. That's why now is a good time to buy this beaten-down stock.
