Fiverr was doing really well not too long ago, but a string of unfavorable quarters has caused it to lose some of its momentum.
When lockdowns and social alienation caused everyone to be compelled to stay inside their homes, investors became quite enthused about Fiverr International (FVRR -5.77%) shares.
It was anticipated that the platform operated by the company, which brings together content purchasers and providers, would prove to be extremely successful.
They had a valid point. That is until everything started getting better again and opening up again.
The fact that Fiverr’s business has been struggling over the past year has forced many shareholders to sell their shares, which has resulted in the stock’s decline of 49% over the previous year.
However, some investors are curious about whether or not the recent sell-off has created a chance to purchase this stock in the gig economy. Find out what we can do by taking a more in-depth look at the company.
What aspects of Fiverr are working well
There are a few things that are going very well for Fiverr right now, despite the fact that it might not appear that way at the time.
To begin, the organization is capitalizing in a fruitful way on a bigger trend that is moving toward the gig economy. According to projections made by Statista, the majority of people employed in the United States will be independent contractors by the year 2027. (either exclusively or in addition to their regular job).
The management team at Fiverr believes that the entire trend toward the gig economy is opening up a total addressable market for the firm that is worth $115 billion. Of course, not all of those workers will be working gigs on Fiverr, but the management team does believe that this is the case.
At the moment, there are 4.2 million buyers using the Fiverr platform, and the company maintains an impressive take rate of 30%, which refers to the percentage of the money it keeps from transactions. As a point of comparison, Upwork, which is one of Fiverr’s most significant competitors, only has a take rate of 15.4%.
However, in spite of the significant market opportunity presented by the gig economy and Fiverr’s capacity to derive a great deal of value for the company from the transactions that take place on its platform, the business faces a number of significant challenges.
What exactly is going wrong with Fiverr?
It’s possible that Fiverr is capitalizing on a shift in the way that people work, but that transformation has been moving at a much more glacial pace as of late.
Consider the fact that during the third quarter of 2022, the company had 4.2 million active buyers using the platform. This represented a modest 3% growth when compared to the same period the previous year.
The company spent $134 million on sales and marketing in the first nine months of 2022, in part to attract more customers, but it has almost nothing to show for its efforts.
Additionally, Fiverr’s sales indicate a concerning tendency. In comparison to the previous year’s third quarter, when sales climbed by 42%, the current year’s third quarter saw a far more modest gain in revenue of just 11%, which brought the total to $82.5 million.
The stock of Fiverr is not a purchase at the present time.
Due to the many factors discussed above, I do not believe that it is a good time to invest in Fiverr’s stock. Although the company is capitalizing on a very sizable potential presented by the gig economy, neither the company’s sales nor the number of buyers using the platform are expanding at the rate that would be expected.
I can see why some people would be interested in investing in Fiverr, especially when you take into account the fact that the company’s stock is currently trading at a price-to-sales ratio of just 4, but I don’t think it’s a good idea to put any money into Fiverr because the company hasn’t shown any sign of significant growth.