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Bull Of The Day: Fiverr (FVRR)

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The digital world is transforming into a gig economy, where ease & convenience are the underlying values. Fiverr (FVRR - Free Report) is a revolutionary company that is driving this shift in employment demand. The pandemic is changing society and our economy abruptly. We are shifting rapidly to a more digitally-driven economy, and Fiverr’s offering perfectly embodies this movement. Analysts remain bullish on FVRR amid these uncertain times and have pushed this stock to a Zacks Rank #1 (Strong Buy).

People work gig jobs for many reasons, whether it’s their primary source of income, a “side hustle,” or just for fun. The next generation of workers is driving the digital freelance economy because it gives them control of their work and responsibilities. In a world where everyone wants to be a unique individual and make a name for themselves, a gig economy thrives.

The Business

Fiverr is set up like an e-commerce platform only instead of selling products it is selling services. The services range from website design to business consulting. Each “gig worker” has a starting price and a star rating, which include written reviews, allowing users to sort the studs from the duds.

This new generation of workers love flexibility (aka ease & convenience) and the ability to get paid & recognized for their results. Fiverr offers people unlimited flexibility, where individuals decide their hours and can work from wherever they want. It also gives workers the ability to gain experience with each unique project providing them with new or honed skills.

Fiverr is great from a business perspective as well, providing them with financial flexibility. This gig economy allows small businesses to cut overhead by reducing the full-time staff and hiring gig workers whenever there is a need. Fiverr is set up to ensure that these needs are met promptly.

Fiverr continues to add service sections, with over 100 new categories in 2019 alone. This vast catalog of service helps to ensure that workers’ skills are effectively matched with buyers’ needs.

Fiverr has been successful in acquiring new buyers as well as maintaining loyal users. Below you can see a graphic from the company’s most recent earnings release that illustrates this point.

Pandemic Impact

The global pandemic has put the entire economy online. The US’s largest cities and metropolitan areas are locked down, making remote working a necessity. Full-time workers are getting laid off by the millions, and what better place to post your lucrative services than Fiverr’s best-in-class freelance site. I expect that supply on Fiverr would increase as unemployment grows.

With companies chopping overhead, they are now in need of services that they can no longer get internally, so they will use experts on Fiverr for their immediate project requirements. I suspect that demand will be temporarily hampered as businesses across the globe suspend extra spending during this uncertain period. 

As the economy opens up and business is revived in the coming months, I presume that a lot of companies will look to Fiverr’s gig workers for project needs as opposed to hiring on an expensive full-time employee.

I see the pandemic accelerating the global trend towards a gig economy, and Fiverr is leading the charge.

Financials

FVRR has been able to consistently grow its topline quarter-over-quarter, exhibiting 42% sales appreciation in 2019 (shown in Fiverr graphic below) and is expected to grow by another 30% in 2020. Despite its lack of profitability, the firm’s margins are progressively improving with scale.

Fiverr is well-capitalized to weather this pandemic with $184 million in cash & equivalents, which more than doubles its total liabilities. The company is almost entirely unleveraged, with close to no debt on the books, making its default risk low.

The Opportunity

FVRR went public last summer and has taken investors for a wild ride since. The stock tumbled after its debut into the fall, where it recovered on robust earnings and exciting guidance. The stock hit a peak after it released its strong Q4 earnings at the end of February, then fell as the market turned south.

FVRR has been discounted with the rest of the market over the last month and a half. Right now, this stock is trading 17% below its most pessimistic price target ($28 per share) and 63% below the more optimistic analyst target ($39 per share). FVRR is a strong long-term investment for your next-generation portfolio today, as long as you can weather the short-term volatility.

Fiverr International Lt. Price, Consensus and EPS Surprise

Fiverr International Lt. Price, Consensus and EPS Surprise

Fiverr International Lt. price-consensus-eps-surprise-chart | Fiverr International Lt. Quote

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