Is FVRR Stock Undervalued?

When Apple’s iPhone was introduced in June 2007, it was immediately clear that life was going to change. The iPhone wasn’t the world’s first smartphone, but it was the most intuitive. It put mobile technology into the hands of millions practically overnight, and that prompted new industries and new methods of getting basic jobs done. 

In just a few short years, the sharing economy was born. Airbnb (ABNB) was founded in 2008, Uber (UBER) launched in 2009, and Fiverr (FVRR) was introduced in 2010. The concept behind these platforms was simple: to facilitate connections between buyers and sellers of a wide range of services. 

Fiverr was one of the first to give remote workers the ability to advertise and bid for digital jobs of all sizes – some priced as low as $5. Today, there are nearly 400 distinct job types, but all roll up under one of the following categories: 

  • Business
  • Data
  • Digital Marketing
  • Graphics & Design
  • Lifestyle
  • Music & Audio
  • Programming & Tech
  • Writing & Translation
  • Video & Animation

Some Fiverr freelancers use the platform to earn a bit of extra cash to supplement their day jobs. Others have built their entire careers around “gig” work. In either case, individuals and businesses have been all too happy to enlist the help of Fiverr’s virtual workforce because the platform offers substantial advantages over traditional hiring methods. 

Why Customers Love Fiverr

Most small and medium-sized businesses don’t have the resources to hire professional service providers full-time, and many discover that the cost of contracting with specialized firms for basic projects is still too high.

Fiverr is an opportunity for customers to connect with skilled professionals from all over the world. The sheer number of service providers makes it far more likely that they will find the right skill set for the right price. 

On the sellers’ side, Fiverr is a chance to build a client list without putting time and money into marketing. That’s especially appealing for industry newcomers who are looking to build their resumes and portfolios. It’s a win/win scenario, thanks to the Fiverr platform which facilitates the transactions. For this service, Fiverr earns 20 percent of every sale. 

Customers love Fiverr, whether they are on the buyer or seller side of the service, and that has contributed to the company’s steady growth. When Fiverr held its IPO in 2019, its market cap came in at $0.75 billion. Today, that figure is closer to $7.5 billion.

Why Has FVRR Stock Been Flat?

Though Fiverr has seen impressive growth in recent years, the company’s story isn’t all good news. FVRR stock saw several large drops in 2021, and many investors are asking, “Why has FVRR stock been flat?” 

During the first quarter of 2021, Fiverr was at all-time highs of more than $320 per share. However, by March, share prices fell below $200 per share, and they were under $160 per share by mid-May.

While Fiverr stock recovered a bit at the start of the third quarter, it lost its momentum when the company released its second-quarter earnings report. 

Fiverr 2Q 2021 Earnings Report

Fiverr’s revenues increased in the second quarter by 60 percent year-over-year. That exceeded analysts’ expectations, and it was higher than management had projected when giving their guidance during the first-quarter earnings call.

Other important achievements included the fact that in just two years, Fiverr doubled its active buyer base and tripled its revenue base. The top brass boasted that the company has grown faster than its competitors, and it is rapidly expanding its market share. 

The bad news is that despite the strong revenue growth and impressive margin improvements, Fiverr is still losing money.

Worse still, top executives stated that due to the impact of loosened COVID-19 restrictions, third-quarter guidance would be adjusted downward. The company expects third-quarter revenue to be lower than that of the second quarter – likely in the range of $68 million and $72 million – with EBITDA between $2.5 million and $3.5 million. 

Since the August decline in share prices, there has been a slight upward trajectory, but nothing like the growth seen previously. That begs the question – will FVRR stock go up? Or to put it another way, is Fiverr stock undervalued today? 

Is FVRR Stock Undervalued?

There is no question that the workforce is trending away from traditional employment. In the United States alone, approximately 30 percent of workers are involved with the gig economy in some capacity. Fiverr is well-positioned to remain a leader in its industry because it has the branding, the technology, and the innovation to stay ahead of the competition. 

However, at the moment, Fiverr stock is fairly costly from a forward price-to-sales ratio perspective – even at its current price, which is significantly lower than its February high. Most analysts agree that Fiverr stock is not undervalued – and if anything, it might be overvalued. 

That’s not necessarily problematic for investors who want to buy FVRR stock now. The big question is whether FVRR stock will go up as the gig economy expands. 

Will FVRR Stock Go Up?

Spending on freelance platforms like Fiverr, Upwork, and TaskRabbit is expected to reach at least $6.7 billion in 2025. That’s a considerable increase as compared to 2018’s $2.35 billion. While Fiverr will divide that revenue with its competitors in some way, there is every reason to believe that Fiverr will grow its market share and come out on top. 

That’s because the company is focused on increasing value for its customers, which in turn increases repeat business and total spend.

Fiverr’s innovative programs and products are proving to be popular among clients, which gives the company a competitive edge over its peers. 

Examples of Fiverr’s new features and programs include Seller Plus – an opportunity for those who offer services on Fiverr to avoid some of the most common obstacles that newcomers face when joining the platform. The biggest benefit, aside from faster payment clearance, is advanced support services – something sellers have been clamoring for in recent years. 

Fiverr also introduced a subscription service for buyers, which it has dubbed Fiverr Business”. Large corporate customers pay a flat monthly rate, which smooths out expenses and encourages increased use of the platform.

Most important of all, Fiverr intends to be prepared for increased volume from Fiverr Business customers. To ensure readiness, it has created partnerships with Wix and Salesforce. The goal is to develop a more qualified Fiverr talent pool, which will increase the overall quality of finished projects. 

FVRR: Buy or Sell?

With some analysts saying that FVRR stock is overvalued, less confident investors may prefer to wait a bit before buying into the company. However, those that agree with the optimists who say Fiverr is on its way up should consider FVRR stock a buy. 

Investors with FVRR stock in their portfolios right now should hold rather than sell. Over time, share prices are more likely to increase than they are to drop, though there could be some ups and downs along the way. 

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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.