FVRR - Fiverr International: The Disruptor Is Being Disrupted (Rating Downgrade)

2024-04-04 02:37:12 ET

Summary

• Fiverr concluded 2023 with its first-ever full-year net profit and a record free cash flow, further fortifying its strong balance sheet.
• FVRR is growing at its slowest-ever rates, with marketplace revenues stagnating and Active Buyers decreasing for the first time, raising concerns about its growth narrative.
• The focus shift to more 'complex services' seems like scaling back from Fiverr's original addressable market, which included a lot of 'simple services', now prone to AI disruption.
• While 2024 is projected to be pretty much the same as 2023, eyes should be on 2025 onwards and how the Company can reignite its business.
• My weighted average DCF valuation for Fiverr implies a price target of approximately $19, leading me to downgrade the stock to 'Sell'.

Fiverr International Ltd. ( FVRR ), the online marketplace for freelance services, announced its latest financial results on February 22nd, which led to a roughly 14% drop in its stock price in the subsequent trading session. Since then, the stock has lost approximately another 5%. The company, which during COVID traded at a nosebleeding valuation of $11.7 billion on less than $200 million in revenues and a negative net income, is flirting these days with its public offering valuation of just $800 million. As I wrote in my previous article about Fiverr, the company has too many question marks , leaving investors to recalibrate their investment thesis about the gig economy powerhouse. Fiverr's latest results and commentary have provided more insights into the health of its marketplace and the effects of AI, leading me to downgrade the stock to a 'Sell'.

Despite achieving its first-ever full-year net profit of $3.7 million, driven by three consecutive quarters of bottom-line profit, Fiverr is exhibiting signs of weakness in its growth narrative. While the company's management team attributes this to the challenging macroeconomic environment (including high inflation, a weak job market, and geopolitical uncertainties), investors may question whether Fiverr has reached its peak growth stage and is now transitioning into a new chapter of its corporate lifecycle as a more mature company....

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