What happened

Shares of freelance marketplace Fiverr International (FVRR 3.74%) fell 11.8% in March, according to data provided by S&P Global Market Intelligence. The drop is somewhat surprising, considering the S&P 500 was up 3.5% for the month. And for Fiverr's part, it was extremely quiet, with no clear reason for the underperformance. Could that make the pullback in March a buying opportunity?

So what

Fiverr reported financial results back on Feb. 22. And analysts released their thoughts about them at that time, with much of the commentary being bullish. Consequently, Fiverr stock was up 36% from the start of 2023 through the end of February. So perhaps some investors took advantage of these strong gains and took some profits during March, leading to its underperformance.

Investors also appear increasingly worried about Fiverr's long-term business prospects, especially with the rise of generative artificial intelligence (AI) applications. The thinking is that AI could do some of the freelance tasks available on Fiverr's marketplace.

Fiverr's management, of course, is far more bullish on the viability of its business over the long term. On March 9, it released the results of a survey it conducted that found that 67% of Gen Z worldwide either is doing freelance work or plans to. This could be good for Fiverr.

That said, survey results don't change anything about Fiverr's business. Therefore, I think the market was right not to let this press release positively affect the stock price in March. In the long term, the stock price should follow business results, making the latter a more important area of focus.

Now what

Regarding business, Fiverr's revenue growth has slowed to an absolute crawl. Full-year revenue was up only 13% year over year in 2022, dropping from 57% growth in 2021. Moreover, management's guidance implies just 2% year-over-year revenue growth in the first quarter of 2023, at best.

Slowing growth isn't great. But on the positive side of things, Fiverr's management is rapidly reducing expenses, bringing the company closer to an operating profit. And the stock's valuation has come way down to a price-to-sales (P/S) ratio of less than four, compared to a P/S ratio of 57 at its peak.

In other words, Fiverr stock is finally somewhat inexpensive, but growth is gone. Therefore, if you buy Fiverr stock today, you're counting on the company's growth to reaccelerate in the future and for freelance work to be viable over the long term, despite possible threats from AI. 

Personally, I don't have an edge when it comes to predicting the future of freelance work. And there are merits to both sides of the argument. Therefore, my approach to Fiverr stock right now is waiting and watching. I'd like to see signs that growth is picking back up before buying more.