I am bullish on Fiverr International (FVRR) as it has tremendous growth momentum, a lengthy growth runway, and the stock currently trades at an attractive valuation based on its multiples relative to its historical levels.
Fiverr International is one of the most useful businesses on the planet right now. It works by trading valuable skills in exchange for cash. Companies that can’t hire talent can ‘outsource’ the work to an independent contractor instead. Fiverr provides companies with a platform to search for talent from around the world.
The business model has proven to be very reliable as it allows companies to find immediate solutions to problems. Fiverr generates a small portion of the proceeds – as a small price for maintaining the platform and connecting the company with top talent.
Strengths
Fiverr has many competitors, from Upwork and Freelancers to independent contractors who become popular enough to start their own ventures. The barriers to entry for the business model are relatively low. Regardless, Fiverr is an established brand with a growing presence and a massive presence of talent and companies.
It has over 500 ‘gig’ categories that include writing, editing, web development, animation, and more. The best part is that Fiverr’s overhead expenses are extremely minimal compared to its cash generation capabilities.
It has over 3.42 million active buyers on its platform actively hunting for new talent. That’s guaranteed cash flow for Fiverr.
Recent Results
Fiverr generated a revenue of $74.3 million with 42% year-over-year growth in Q3 2021.
The stock value for Fiverr sits at a cozy $76 and seems to follow an upward trend, although it does have its fair share of ups and downs. All this growth seems to be driven by an ever-increasing number of active buyers. The company also recently acquired CreativeLive and Stoke Talent to diversify its freelancer strategy.
Fiverr’s financial outlook for the next year is looking just as strong, as the world continues to pivot to a gig economy.
Valuation Metrics
FVRR stock looks attractively priced here as it trades well below its historical averages on an EV/EBITDA ratio and normalized earnings per share basis.
Its EV/EBITDA ratio is 82.3x compared to its historical average of 104.5x and its normalized earnings per share ratio is 127.2x compared to its historical average of 182.7x.
Analysts expect revenue to grow by 26.4% in 2022, and EBITDA to grow by 94.1% in 2022.
Wall Street’s Take
According to Wall Street analysts, FVRR earns a Moderate Buy analyst consensus based on two Buy ratings, four Hold Ratings, and zero Sell ratings in the past three months. Additionally, the average Fiverr price target of $159.83 puts the upside potential at 106.6%.
Summary and Conclusions
Fiverr is a leading player in the growing gig economy and stands to benefit immensely from the ongoing work-from-home and entrepreneurial trends.
As a result, the company is growing rapidly and is bolstering both its growth and its competitive advantages by making strategic bolt-on acquisitions.
On top of that, the stock looks very attractively priced here as Wall Street analysts are more bullish than bearish on it right now, the average price target indicates massive upside potential over the next year, and its valuation multiples are well below historical averages.
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