With just three weeks left to the year, the market remains down 17%. As unsettling as that is, it has remained steady for several months without further decline, falling short of a bear market.

The tech sector, however, really fell off a cliff in 2022. The Nasdaq-100 tech index, for example, is closing out the year with a loss nearing 40%. 2022 saw the flight to safety, with investors putting their money into value stocks, leaving tech in a lurch. Fiverr International (FVRR 1.32%) is a classic growth stock in the tech sector, which is probably the worst category to be in this year. Its stock is down 72% as we get closer to the end of 2022. Should you buy it for 2023?

Why Fiverr was hot

Fiverr operates a platform that connects freelancers, or "sellers," with people who are looking to work with freelance workers, or "buyers." It was demonstrating steady growth before the pandemic as it honed its model, which is different than most freelance platforms.

It has developed what it calls a product-as-a-service model, which means that the freelancers who use its website market their services as products, or gigs. That's in contrast to the standard model, where service providers bid on a project that's posted by a buyer. On Fiverr, buyers can browse gigs, which come with a price tag and a defined work scope. This takes a lot of the tension of service and price negotiation out of the transaction, for a smoother and more productive process.

Fiverr also operates a program geared to medium and large-sized businesses called Fiverr Business, with premium services. This has been an incredible growth driver as large companies have decentralized over the pandemic and more people work from home. Users include large companies such as Unilever and L'Oreal.

The company also has several programs for sellers, such as a subscription service they can offer to regular buyers, and seller plus, a premium offering that gives high-sales sellers extra services.

Fiverr took off during the pandemic. Revenue soared in 2020, and the stock price skyrocketed.

FVRR Chart

FVRR data by YCharts

Why it's not hot in 2022

That changed in 2021 as the world opened up again and investors realized Fiverr's growth and its stock price were not sustainable. It's still posting net losses, and as people got back to offices, growth decelerated. That trend has continued throughout 2022.

However, there are many factors that are now working in Fiverr's favor. First, despite slowdowns, sales are still increasing. Sales increased 11% year over year in the 2022 third quarter, keeping it in the double digits. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $6.6 million, a decrease from $7.3 million last year, but ahead of guidance. It uses this metric as an indication of how well it's running its core business. Revenue and adjusted EBITDA both came in ahead of Wall Street's expectations. 

After huge increases in 2020 and 2021, active buyers are holding steady at 4.2 million. That's still a slight increase over 4.1 million at this time last year.

Chart showing growth in Fiverr's active buyers.

 Fiverr active buyers. Image source: Fiverr International.

There were two impressive signs of growth in the third quarter. One sign was spend per buyer. This increased 12% over last year to $262, which signals satisfied customers. It's also partially due to the popularity and growth of the business program, which has huge potential as work trends continue to shift.

The other was take rate. The take rate increased from 28.4% last year to 30%. Take rate is the amount Fiverr gets from each transaction on the site, and that's a huge number -- nearly a third of all money passing through the platform goes to Fiverr. In comparison, competitor Upwork's take rate in the third quarter was 15.4%. The higher take rate was due to Fiverr's added-value services.

What should you expect from Fiverr in 2023?

Management is expecting a further slowdown in the fourth quarter, with a revenue increase of about 4%. However, it should be easier to post higher sales in 2023, since it's facing a milder 2022. 

Fiverr has turned its focus to cost efficiency as demand slows, and net loss narrowed in the third quarter from $14.3 million to $11.4 million. It appears to be on a track toward profitability, and positive earnings are within range.

Fiverr stock is also sufficiently cheap at this point, which allows it to be considered a good value. Specifically, the stock trades at 3.7 times trailing-12-month sales. Wall Street expects Fiverr stock to gain as much as 61% over the next 12 months, and it looks like a great buy for 2023.