Fiverr International (FVRR +0.49%) is getting back on its feet after a couple of tough years. The online freelancer services wrangler's stock has gained 53% from the multiyear low it touched in November, but you can't call it a full recovery yet. Fiverr's share price still stands more than 90% below the all-time high it reached in early 2021.
The company faces a few challenges, and its top-line growth is not what it was during the pandemic's lockdown stages, when the gig economy was in its heyday. Yet I see several helpful market trends and improving metrics for Fiverr, and they raise green flags for its future.
1. Fiverr's sales never stopped growing
Many investors were quick to abandon gig economy champions like Fiverr after the first COVID-19 vaccines became widely available. The bearish thesis assumed that the company's golden era of growth would hit a brick wall as people returned to their pre-crisis lifestyles and workplaces.
But that gloomy outcome for Fiverr never materialized. Its top-line growth slowed down materially, but always moved forward. Every earnings report before, during, and after the pandemic set a new record for trailing sales -- and its dwindling percentages of revenue growth have begun to climb again over the last couple of quarters.
In other words, the health crisis was never the whole reason for Fiverr's success, and the business is growing again after a short period of nearly flat sales.
FVRR Revenue (TTM) data by YCharts.
2. Wall Street pros are starting to catch on
Analysts' recommendations and price targets are never perfect guides to any stock's immediate future, but their opinions often have market-moving power. Right now, the analyst community broadly agrees that Fiverr is poised to beat the market over the next year.
According to The Wall Street Journal, 11 analyst firms have reported ratings on Fiverr's stock recently: Eight of them call it a buy and the remaining three settled for a hold, and there isn't a sell rating in sight. The average 52-week price target stands at $36.18 per share. That's 16% above Fiverr's current price.
Among these bullish reviews, the financial heavyweights at Goldman Sachs recently boosted its view from neutral to bullish, citing a healthier U.S. economy and a steady flow of innovative service upgrades. Goldman expects Fiverr's profit margins to expand in 2024 while the top line should see "re-acceleration" from more customers and higher average spending per client.
"Based on this framework against current valuation/share price, we now see a positive risk/reward skew on the stock," Goldman analyst Eric Sheridan wrote. In other words, Fiverr's stock looks undervalued based on modest business risk and low share prices. Sheridan's target price is $43 per share, comfortably ahead of the Street's consensus.
NYSE: FVRR
Key Data Points
3. Fiverr isn't resting on its laurels
An innovative spirit should drive Fiverr's financial improvements in 2024 and beyond. The company released several new products, services, and tools over the last year. For example:
- It bought talent management expert Stoke Talent for $95 million in 2021. Last spring, that platform was renamed Fiverr Enterprise, giving enterprise-class business giants a frictionless platform for day-to-day management of third-party services. The system includes budgeting, project management, and scheduling tools.
- For service buyers just below the large-scale enterprise class, Fiverr Pro offers project planning and management services across a deep pool of freelancer talent.
- Fiverr Neo is an artificial intelligence (AI) chatbot, similar to OpenAI's ChatGPT, that helps service buyers find the right freelancers. "The more choice people have, the more they struggle to choose," said CEO Micha Kaufman in the product announcement six months ago. Neo helps buyers talk through their needs and requirements, matching them with available freelancers. The tool was rolled out to Fiverr users three months ago and will be followed by more AI features over time.
These constant innovations to its business model help make it a perfect fit for the young and rapidly evolving freelance services market. Not every swing will be a home run, but a .300 batting average can get you into the Hall of Fame.
Fiverr, with its ongoing push to offer new solutions to its clients, isn't just swinging for the fences -- it's racking up those all-important base hits. It's this willingness to try many new ideas in pursuit of the occasional moment of brilliance that should set the stage for Fiverr's long-term success.
