In the most pessimistic framework, OpenAI’s generative artificial intelligence (AI) platform ChatGPT presents an existential threat to the freelancer networking ecosystem Fiverr (NYSE:FVRR). Thanks to ChatGPT’s ability to create content, the contributions of independent professionals – particularly content creators – may be rendered obsolete. However, the doomsday calls may be overstated and premature. Therefore, I am bullish on FVRR stock.
FVRR Stock Seemingly Faces an Overwhelming Challenge
To be clear, no investor should overlook the risks that ChatGPT poses on freelancing networks like Fiverr. Just last week, FVRR stock fell by over 26%. For the year, after getting off to an auspicious start, shares find themselves down about 2%. Naturally, the red ink centers on the “replacement theory” angle undergirding ChatGPT and similar chatbots.
As TipRanks reporter Sirisha Bhogaraju pointed out, Goldman Sachs (NYSE:GS) predicted in a report, “If generative AI achieves the desired productivity through task automation, it may impact 300 million full-time jobs globally.”
According to the report, “labor productivity due to widespread AI adoption could fuel a 7% or about $7 trillion increase in the annual global gross domestic product (GDP) over 10 years.” Therefore, if generative AI rises to meet its full potential, the machines could significantly disrupt the labor market.
However, that’s a big “if,” and even Goldman Sachs concedes that most jobs and industries are “only partially exposed to automation and are thus more likely to be complemented rather than substituted by AI.”
Still, another research paper by the University of Pennsylvania and OpenAI stated that “about 80% of the U.S. workforce could see at least 10% of their work tasks being impacted by the introduction of large language models (LLMs), like generative pre-trained transformers (GPTs). Furthermore, about 19% of workers may see at least 50% of their tasks impacted by LLMs.”
While the rising framework seems ominous for FVRR stock, investors might not want to give up just yet.
AI Isn’t Foolproof
Primarily, the key reason why investors shouldn’t panic about FVRR stock is that it might take ChatGPT and its peers more time than expected to reach their full potential. In some ways, announcing doom for companies like Fiverr amid AI-related headwinds is akin to placing bets before the NFL season has begun. Basically, it’s better to see some real games before making serious prognostications.
Fundamentally, a key challenge for ChatGPT is that it’s not 100% foolproof – far from it. As several critics pointed out, the platform occasionally generates wrong answers. Indeed, even OpenAI offers monetary rewards for users to report bugs in the underlying AI system.
Another factor that should keep FVRR stock relevant is that content creation evokes the author’s signature. For example, a filmgoer can identify elements that distinguish a Steven Spielberg-directed film from, say, one overseen by Quentin Tarantino. However, AI content is often derivative, evoking the signature implemented by computer programmers.
Therefore, patterns of AI-generated content emerge that human audiences can pick up on. Already, academic professionals identified acts of cheating among students inappropriately leveraging AI protocols. Moreover, even as AI improves, so too will AI-driven protocols that seek out and identify cheaters, rendering reputational loss along with potential legal consequences.
Ultimately, the free market should incentivize honest, human-created work for human consumption. So, FVRR stock should eventually recover following the current troubles.
Financials Present Glimmers of Optimism
To be sure, the financials undergirding FVRR stock leave plenty of room for improvement. Conspicuously, it doesn’t enjoy the most stability regarding its balance sheet. For instance, its cash and cash equivalents amount to $463.18 million. On the other end, long-term debt and capital lease obligations amount to $460.97 million. Basically, the cash-to-debt ratio is 1:1, which is not what you want to see in a challenging environment such as this.
However, Fiverr benefits from long-term revenue growth. In the fourth quarter of last year (the most recent report), the company posted sales of $83.13 million. While that’s only a 4.2% improvement over the year-ago quarter’s tally of $79.76 million, it’s occurring at a time of a tight labor market.
Should mass layoffs continue to accelerate, rising desperation might cynically benefit Fiverr. Again, it’s too early to give up on FVRR stock.
Is Fiverr Stock a Buy, According to Analysts?
Turning to Wall Street, FVRR stock has a Moderate Buy consensus rating based on seven Buys, four Holds, and zero Sell ratings. The average FVRR stock price target is $49.73, implying 77.3% upside potential.
The Takeaway: Be Patient with FVRR Stock
In all fairness, ChatGPT and the broader generative AI industry present risks to FVRR stock. Few deny this reality. At the same time, you don’t want to go the other extreme and hype up AI protocols. Their continued shortcomings will likely leave much viability for human freelancers, making Fiverr intriguing over the long haul.