Fiverr International (FVRR +0.19%) and UiPath (PATH +4.53%) both initially dazzled investors with their disruptive growth potential. Fiverr is a leading online marketplace for freelance gig employers and workers, and UiPath automates repetitive office tasks (like data entry, mass emails, and onboarding customers) with software robots.
Fiverr went public in June 2019 at $21 a share. It surged to an all-time high of $323.10 in February 2021, but it's now worth about $30. UiPath priced its IPO at $56 in April 2021. It closed at a record high of $85.12 a month later, but it now trades at just $12.
Image source: Getty Images.
Both stocks plummeted as rising interest rates drove investors away from speculative and unprofitable companies that were trading at frothy valuations. But could Fiverr or UiPath make a surprising comeback in 2023?
What happened to Fiverr?
Fiverr's online marketplace offers access to more than 500 categories of freelance gigs, including design, marketing, and writing tasks. It generates most of its revenue from transaction and service fees.
In 2020, Fiverr's revenue surged 77% to $189.5 million as the pandemic prompted more people to assign and accept online gigs. Its number of active buyers increased 45% to 3.4 million, its average spending per buyer rose 20% to $205, and its take rate -- or the percentage of each transaction it retains as revenue -- improved 40 basis points to 27.1%.
That momentum persisted even after the pandemic-induced lockdowns ended. Fiverr's revenue rose another 57% to $297.7 million in 2021 as its number of active buyers increased 23% to 4.2 million, its active spending per buyer climbed 18% to $242, and its take rate improved 210 basis points to 29.2%.
NYSE: FVRR
Key Data Points
But for 2022, Fiverr only expects its revenue to rise 12%-14% to $334-$340 million as the peaking growth of its active buyers (4.2 million at the end of the third quarter) offsets its higher spending per buyer ($262) and take rate (30%). It attributed that slowdown to macro headwinds, which forced many companies to curb their hiring of freelance workers.
Meanwhile, Fiverr's net loss widened from $14.8 million in 2020 to $65.0 million in 2021, then widened again to $70.2 million in the first nine months of 2022. It expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to decline by a percentage point to 6.7% in 2022, which is far below its long-term target of 25%.
Those gloomy numbers cast a dark cloud over Fiverr, even though it insists its prospects will improve once the macro headwinds wane and companies ramp up their hiring again.
What happened to UiPath?
UiPath dominates the robotic process automation (RPA) market, which could still expand at a compound annual growth rate (CAGR) of 23.4% between 2022 and 2029, according to Fortune Business Insights, as large companies gradually reduce their long-term dependence on human employees.
UiPath's revenue jumped 81% to $607.6 million in fiscal 2021 (which ended in Jan. 2021) and grew another 47% to $892.3 million in fiscal 2022. But for fiscal 2023, it expects its revenue to only rise 15% to $1.03 billion.
NYSE: PATH
Key Data Points
Just like Fiverr, UiPath's growth stalled out as the macroeconomic headwinds forced companies to rein in their spending on big companywide software upgrades. It might make sense to install UiPath's army of software robots as an organization expands, but it becomes less of a priority during economic downturns as companies execute hasty layoffs and other cost-cutting measures to protect their margins. That pressure was also exacerbated by tough currency headwinds.
UiPath's adjusted gross margin slipped from 90% in fiscal 2021 to 87% in fiscal 2022, then dropped to 85% in the first nine months of fiscal 2023. That ongoing compression suggests that UiPath is losing its pricing power against newcomers in the RPA market like Salesforce's MuleSoft RPA, Appian RPA, and AutomationEdge.
That's worrisome because UiPath is still deeply unprofitable. Its net loss widened from $92.4 million in fiscal 2021 to $525.6 million in fiscal 2022, and only narrowed slightly to $300.7 million in the first nine months of fiscal 2023. It turned profitable by non-GAAP (generally accepted accounting principles) in fiscal 2022, but it dipped back into the red throughout fiscal 2023. UiPath insists its long-term future is bright, but it will need to overcome a lot of near-term macro and competitive challenges.
The valuations and verdict
Fiverr and UiPath both look a lot cheaper than they did during the meme and growth stock rally in 2021. Fiverr trades at 3 times its 2023 sales, while UiPath trades at about 6 times its fiscal 2024 sales.
I wouldn't rush to buy either of these fallen growth stocks yet. But if I had to choose one over the other, I'd buy Fiverr instead of UiPath for four reasons: Many of its core growth metrics are improving even as it gains fewer buyers, its challenges are primarily cyclical instead of existential, its GAAP losses look more manageable, and its stock looks a lot cheaper.
