I started my Fiverr International (FVRR 3.74%) in the fall of 2021, at the princely price of $185 per share. I doubled down on my Fiverr investment three months later, inspired by the freelance services broker's prospects for long-term business growth. This time, each share cost me $238. And when the stock took a steep dive in 2022, I doubled my Fiverr bets again. And I mean that in dollar terms. The same sum bought a lot more stock this time, since Fiverr's share price had plunged all the way to $41.
So I literally bought Fiverr's stock in thirds. Here we are, 17 months after my latest real-money dive into this stock -- and shares are changing hands at just $22 today. It's another 47% dip from the cheapest entry point in my portfolio.
Many investors would grumble something about "falling knife" at this point, sell their Fiverr stock, and never look back. And I think that would be a huge mistake. In fact, I'm tempted to add another tranche to this exciting growth stock right about now.
As much as I enjoy the opportunity to pick up a great stock on the cheap, it's about time to turn that chart upward again -- maybe as soon as after this Thursday's earnings report. I could be wrong, of course, but the worst-case scenario would only extend the bargain-bin discount again.
So let me tell you why I think the tipping point could be here as early as this week.
Why Fiverr isn't the pandemic play everyone expected
People wrote Fiverr off as a direct play on the COVID-19 lockdowns. With the American and global economy in full working order, there'd be no need for freelancing side gigs. Hence, Fiverr's revenue growth would hit a brick wall at the end of the work-from-home era. The was the essence of the bearish theory that started off Fiverr's plunging stock price trend in 2021, when effective coronavirus vaccines became widely available.
But that's not how Fiverr's financial progress has worked out in reality.
- Revenues never stopped growing. Sure, the growth rate slowed down amid the inflation-based economic crisis in 2022 and 2023, but that's a marketwide phenomenon and hardly unique to Fiverr's business model.
- The top-line revenue collection is already picking up speed again. Sales increased by 5.2% year over year in the second quarter, more than triple the 1.5% pace in the first quarter. And for this week's update, management expects revenue growth to clock in at roughly 10%.
- More importantly, the company kept generating cash profits even in the darkest days of the inflation downturn. Fiverr held on to $46.4 million of free cash flows over the last four quarters, based on trailing sales of $343.0 million. That's a cash-based profit margin of 13.5%, alongside modest sales growth.
So Fiverr hit a speed bump based on inflation and not on the lack of coronavirus lockdowns. The events are connected, and we would never have seen an inflation crisis at all if the pandemic didn't shake up the world economy like a snow globe, with unpredictable long-term effects. Still, Fiverr turned out to be more sensitive to economic trends than to unique health crisis policies.
Predicting Fiverr's road ahead
Fiverr is champing at the bit, waiting for the starting gun of a healthier global economy. Freelancers are just as vulnerable to cash-conserving budgets and soft consumer spending as any other type of business operator. I can't wait to see how Wall Street will react when this left-for-dead growth stock gets a second wind with robust top-line increases, right next to that beefy cash flow margin.
My own investment in Fiverr is admittedly underwater, and while my near-term returns aren't looking sunny, I'm anchored in for the long-term storm. This perspective isn't just about holding fast to my own positions; it's about seeing the value in weathering the market's ebbs and flows. If you, too, are looking at the horizon beyond immediate gains, this could be a signal to consider what long-haul investments like Fiverr might mean for your portfolio, especially at current prices that might not reflect the company's disruptive potential.
Sustainable growth is the real source of shareholder value, and Fiverr's job-matching services are poised to provide plenty of that. The temporary bumps in that road to wealth-building gains are just potholes and speed bumps.
So this week looks like a good time to take action. Fiverr looks incredibly cheap right now, trading at just 2.4 times trailing sales and 18 times free cash flows. You can pick up Fiverr's high-octane growth stock at red-tag value prices, and I'm not sure the sale will persist after Thursday's third-quarter report. Sooner or later, Fiverr's rekindled growth should inspire richer stock prices too. Fingers crossed for signs of a fresh upswing.
