Is Fiverr a Good Stock to Watch as Gig Economy Expands?

Is Fiverr a Good Stock to Watch as Gig Economy Expands?

The gig economy has been on a ride nobody could stop, now galloping along thanks to the increasing numbers of tech-driven freelance marketplaces and on-demand services. A technology that started with ride-sharing apps has become a full-fledged marketplace for virtually every service imaginable-from food delivery and groceries to finding a plumber or a graphic designer-all with just a few taps on your smartphone.

The gig economy continues to grow amid strong advancement in digital technologies and the work-from-anywhere trend that has underscored a whopping near-$800 million raised by approximately 35 venture-backed companies within the last two years alone. And if growth wasn’t enough, developing economies see a boom in participation in this very space that’s going so wild.

Within such an evolving landscape, keep an eye out for Fiverr International Ltd. (FVRR)? Let’s get into it.

Fiverr is a busy freelance marketplace where people can hire talent in web design to video production. Their job postings begin at the minimum of $5. The site takes a percentage of every transaction and provides subscription options for the buyer and seller. Fiverr freelancers can even make their gigs into full-time careers.

CEO Micha Kaufman has stated that in the Q2 earnings call, the company has withstood various challenges brought forward by the macro environment by ensuring operational excellence and profitable growth. He further said, “We’ve made amazing strides in our product evolution with profession-based catalog and hourly contracts.”

Mid-2024 was a bit of an assortment for FVRR, who saw a downsizing in traffic-particularly in programming and tech areas-but the company is optimistic. “Despite a 7% year-over-year decline in U.S. job openings and a 17% drop in the information sector, AI continues to drive growth for Fiverr, particularly in complex services, and is expected to be a growth driver moving forward, said Kaufman.”.

FVRR shares have surged 13.1% in the last six months and, thus, closed last trading session at $24.81.

Here are some factors that could influence FVRR’s performance in the next few months:

3 Stocks to Double This Year

Good news circulating end

On July 31, FVRR announced it acquired AutoDS, a subscription-based drop-shipping platform. This acquisition is expected to significantly enhance the company’s eCommerce capabilities while introducing a new source of recurring revenue through subscriptions as it offers tools for research, inventory management, and automated fulfillment.

Kaufman noted that the fact that AutoDS-the company administers over 150 million products and has tens of thousands of subscribers-pertains to a transition of the company from a marketplace to a platform. Considering the ongoing growth trend, with the global drop shipping market expected to rise from $285 billion to more than $2 trillion by 2033, AutoDS’s automation tools and expansive network placed FVRR at the forefront of the burgeoning digital services space.

Besides the acquisition, the company launched new features such as a profession-based catalog and hourly contracts, which will help it to penetrate further into its market and improve along with the company’s aim of becoming a full service platform for talent and software.
Good Financial Performance

For FVRR, the revenue for the second quarter closing June 30, 2024, stood at $94.66 million, 5.9% higher than last year, and above an analyst’s estimate of $94.63 million. The non-GAAP gross profit increased 6.2% year-over-year to $79.93 million with a margin of 84.4%.

The company’s adjusted EBITDA grew 16.8% from the prior-year value to $17.85 million, and cash flow used in operating activities rose by 11.9% from the corresponding quarter of the previous year to $20.97 million. Non-GAAP net income of FVRR came in at $23.83 million and $0.58 per share, which increased 18.9% and 18.4%, respectively, compared to the corresponding quarter of the previous year.

Also, free cash flow was at $20.66 million, up 12.5% year over year. The cash and cash equities were recorded at $188.73 million for the June 30, 2024, and as of December 31, 2023, it was $183.67 million.

Positive Analyst Estimations

Revenue estimates for the fiscal third quarter, ending September 2024, have come in at $96.39 million, or 4.2% more than the same period last year. The consensus estimate of EPS for the current quarter is pegged at $0.61, which indicates a 10.1% year-over-year improvement. Good reasons to expect a similar outcome again exist on account of the company’s excellent history of an earnings surprise by beating the consensus EPS estimates in all of the trailing four quarters.

The fiscal year 2024 is expected to record EPS growth of 20% year over year at $2.34 and 6.6% revenue growth from the same period last year to $385.17 million.

Revenue and EPS in fiscal 2025, on the other hand, are expected to have revenue and EPS increases of 9.8% and 10.5%, respectively, versus the same period last year at $423.02 million and $2.59, respectively.

Lower-Than-Industry Valuation

As of now, FVRR is trading at 10.52x forward non-GAAP P/E, which is 45.4% lower than the industry average of 19.28x. Moving to the forward EV/EBIT and EV/EBITDA multiples, the stock has ratios of 9.32 and 8.74, respectively, which are 41.3% and 23.5% lower than the industry averages of 15.88x and 11.42x, respectively.
The stock’s 1.63x forward EV/Sales is 10.4% lower than the industry average of 1.82x.
High Profitability

FVRR’s trailing-12-month gross margin sits at 83.34%, a 165.7% lead over its industry, averaging 31.36%. Likewise, its trailing-12-month levered FCF margin is 18.49% for 181.8% above the industry average of 6.56%.

POWR Ratings Reveal Potential

The promise for FVRR is reflected in its POWR Ratings. It has a grade of B, which translates to a Buy in our proprietary rating system. Each POWR Rating is calculated based on 118 distinct factors with each factor weighted to an optimal degree.

In addition to the POWR Ratings system, our proprietary rating system also grades each stock on eight distinct categories.

FVRR scored an A grade in Growth, which is consistent with the excellent financial performance posted in the last reported quarter. Its B grade in Value and Quality also all squares with the discounted valuation and its robust profitability.
FVRR is currently ranked #7 in the Internet industry. To see FVRR’s Momentum, Stability, and Sentiment ratings, click here.
Conclusion

The global gig economy is no passing fad and will continue to shoot toward almost $2 trillion by 2031. As the world is facing its biggest job shortage yet, with the demand for flexible work climbing, gig platforms are experiencing growth. More than 3.8 percent of Bank of America’s customers earned income from gig platforms during March 2024, the highest yet. The percentage of gig workers making monthly income has continued to increase steadily from 2021 to date, indicating a hardening interest in freelance work.

Growth in gig economy FVRR, which is positioned to take advantage of rising growth, has had healthy financials and increasing profitability, coupled with a robust long-term growth prospects, makes it a great stock to invest in.

Fiverr International Ltd. (FVRR): how does it rank versus peers?

Meantime, while FVRR scores a B overall grade and hence carries a Buy rating, you may also consider the following other stocks within the Internet industry. These include Meituan (MPNGY), Dingdong (Cayman) Limited (DDL), and Yelp Inc. (YELP); all carry an A (Strong Buy) or B (Buy) ratings. To find more Internet stocks, click here.
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FVRR shares closed at $25.40 Friday afternoon, up $0.79 (+3.21%). YTD, FVRR is down -6.69%, while the benchmark S&P 500 index rose 19.17% during the same period.