Is Fiverr A Top Stock To Hold for 10 Years?

As inflation has frustrated many businesses, many merchants have come to rely on freelancers and contractors to help them support their customers.

One of the companies at the center of the freelance economy is Fiverr (NYSE: FVRR), which operates a marketplace that connects creators and gig workers with the merchants who require them.

Fiverr shares have plummeted by 90% from highs of $325 per share a few years ago to around $30 per share. This year, FVRR has had a steadier run, and rallied by 15.2% year-to-date.

Investors have noticed that the company has notched impressive revenue growth over the last few quarters, and management raised guidance for the full year. But what about the longer term? Is Fiverr a good stock to own over the next decade?

4.2 Million Reasons To Own Fiverr

After a momentary selloff following the company’s earnings release for the third quarter of 2024, FVRR is breaking out due in part to Fiverr’s reported revenue of $99.6 million, which was an 8% year-over-year increase over its $92.5 million in revenue last year. It was also 3.36% higher than analysts expected.

Fiverr had Q3 GAAP net income of $1.4 million, which was a decline from last year’s $3 million. Diluted earnings per share of $0.04 slightly underperformed analysts’ estimates.

The company had 3.8 million active buyers on its platform, down 9% from the 4.2 million it had last year but those buyers are spending more. Take for example the average spend per buyer that rose by 9%, from $271 last year to $296 per share in Q3.

Free cash flows came in at $10.6 million in the third quarter after a one-time escrow payment of $12.2 million. Excluding that payment, the company’s free cash flow was $22.7 million compared to $23.1 million last year.

“The investments we made in strengthening our value-added product portfolio have clearly paid off, as we continue to diversify our business model and expand into a platform where businesses can lean into both technology and human experts,” said Micha Kaufman, founder and CEO of Fiverr, in the release. “The integration of GenAI technology allows us to develop groundbreaking products that were not possible before.”

Is Fiverr Now an AI Stock?

Fiverr’s AI efforts are led by its Dynamic Matching tools, which use artificial intelligence to match businesses that have complex requirements with the freelancers that can perform them.

In conjunction with the company’s profession-based catalog and its hourly-based contracts, Fiverr’s goal is to create an experience where buyers can easily find the personnel who can perform complex projects for any duration.

The company is also building loyalty with its customers through its Business Rewards Program on Fiverr Pro. Management believes the program drives customers to spend more, and reportedly it has more buyers with annual spending over $10,000.

Fiverr has also leaned into AI with a controversial new ad campaign. The company released a musical ad campaign which prominently features the line, “Nobody cares if you use AI.” The point of the ad is that many companies are only concerned whether their employees, or contractors, can deliver the desired results, not how they achieve them.

That perspective might raise eyebrows in the freelance industry where the use of AI has been a hot topic. The ad makes the point that artificial intelligence is a tool like a pen or a brush, but AI is much more advanced.

It’s not clear if the ad campaign will drive sales, but Fiverr is enjoying a spending uptick. For that reason, Fiverr raised revenue guidance for full-year 2024 and boosted adjusted EBITDA forecasts too. The top brass believes the current model will deliver strong cash flow generation that will help it reach its three-year objectives for Adjusted EBITDA and free cash flow.

How Do Analysts Rate Fiverr Stock?

Retail investors have started buying FVRR, but analysts have been reluctant to rate the company. However, there are now 11 ratings on the stock, and 7 of them assess FVRR to be a buy. The highest price target is $42 per share, which translates to a 39.1% increase from where the stock currently trades.

The average forecast is $34.55, which would be a 14.4% increase over the next 12 months. There are four hold ratings, but there is currently no Sell rating on FVRR. The lowest forecast has Fiverr shares dropping by 7.25% to $28 per share.

Is Fiverr Stock Undervalued?

Analysts largely believe Fiverr is due to recover, and that conclusion is supported by the company’s price-to-sales value of 2.7x, which is lower than the S&P 500’s P/S value of roughly 3x. However, fellow freelance marketplace Upwork has a P/S value of 2.4x.

Upwork has faced many of the same issues as Fiverr, and both stocks have followed a similar trajectory. Though Upwork stock is bouncing back after a dismal year, that company’s shares are still down 2.5% year-to-date compared to Fiverr’s upswing.

Is Fiverr Stock Worth Holding Long-term?

Fiverr’s marketplace business model makes it very difficult to disrupt by competitors and has created a wide moat that makes it a long-term hold.

Whether the upswing can sustain short-term might not depend as much on the company’s platform as on the continued economic impacts on Fiverr’s clients. Many businesses have been forced to cut costs any way they can, which includes laying off staff.

However, if the economy improves those organizations might look to a freelance platform like Fiverr before they hire full-time employees. The company’s marketplace could be a powerful solution in that event, but also in the years to come.

Though there are plenty of headlines about employees returning to the office, the gig economy isn’t going away. That Fiverr has been able to increase its revenue and raise its guidance in tough economic times is a strong indicator of future success. That means Fiverr could be the growth stock that rewards its investors ten years from now.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.