About Fiverr
This company traded as high as $323.10 and is currently trading at $34.60.
The Fiverr stock bubble has popped and our team is immensely grateful.
Fiverr connects buyers and sellers. Specifically, they appear to specialize in pairing businesses with freelance workers all across the world to provide services for companies in need of relatively inexpensive help.
Fiverr is like Amazon, but with digital services and not just products.
Simply considering the idea and business model of the company, we love it. In fact, we have used their services in the past to help spruce up our site, work out some minor glitches and some design work for our site as well.
Ok, so we’re a little bit biased.
However, there is no other platform that essentially hosts a marketplace of buyers and sellers of services.
Craigslist? Close but no cigar.
While a notable and well-used platform, Fiverr connects digital doers to other doers as opposed to Craigslist, which just connects service providers to users out in the real world, not really over the internet.
How does Fiverr make money? Primarily through transaction fees. It’s generally understood that Fiverr takes a 20% (of the total job cost) cut of transactions from buyers and sellers. If it wasn’t clear, Fiverr apparently makes 20% from the buyer and in addition makes 20% from the seller per transaction, 40% total.
These 20% takes can really add up.
Now that you have a better idea of what the company does and how Fiverr makes money, let’s take a look at the company’s relative financial strength.
Fiverr’s stock financials
From a strict value perspective, the stock seems ripe for the bulls.
Specifically, in the past year the company’s stock has cratered from nearly $258 to $38. We attribute this drastic fall in share price to two things: easing of COVID-19 restrictions and the Street being bearish on the continued demand for freelance work.
While the world continues to open back up and get back to somewhat normal, many likely think that people won’t need as much freelance help or won’t be working as much on digital projects.
We think they are wrong.
Nevertheless, neither yours or our opinions matter; the objective, core financials behind Fiverr are the little things that make or break both investments and entire companies.
Before diving into the company’s numbers, we should preface our analysis by explaining that Fiverr was founded in 2010 and filed to become public in 2019.
We feel the need to mention this because the company is probably in the stage of investing a lot of cash in efforts to fuel more growth while simultaneously paying down some debt along the way. Subsequently, we suspect the company’s cash flow statement won’t paint the prettiest financial picture but as long as their likely negative net income appears manageable over time and trending more and more towards net positive, we’ll have greater confidence in management’s ability to keep the Fiverr ship afloat.
Fiverr maintains a balance sheet composed of $932 million in total assets and $585 in total liabilities. This is a pretty favorable balance sheet given the company has likely been and still is in growth mode. If they can keep a pretty trim balance sheet in this stage, the company shouldn’t have any issues keeping their balance sheet favored to the total assets side as their business matures and doesn’t grow as aggressively.
Unsurprisingly, Fiverr’s total revenue since 2017 according to their income statement has dramatically each year. Specifically, the company’s revenues in 2017 stood at around $52 million which subsequently grew to nearly $76 million in 2018 and eventually leaping to almost $300 million in 2021.
This is the kind of positive revenue growth that we hoped to see from Fiverr. However, it will be interesting to see whether or not this trend continues as COVID-19 lockdowns ease. We project that the company’s total revenue will continue to grow but not as rapidly as it did during 2019, 2020 and 2021.
Onto Fiverr’s cash flow statement, their net income that we previously worried about isn’t as daunting as expected. We assumed their total annual negative net income would’ve been a lot worse than it actually is. For instance, in 2017 the company had -$19 million in net income, which jumped up to around -$35 million for the next two years and surged to -$65 million in 2021.
Frankly, we thought their negative net income would have been somewhere in -$100-200 million range.
We were pleasantly surprised!
This recent surge can likely be attributed to management funding more growth behind system upgrades, use of artificial intelligence and other projects the company is pushing as the pandemic restrictions ease. However, from our perspective this increase in negative net income isn’t considerable given the company’s balance sheet strength and very strong total revenue.
Additionally, if the company is investing in bettering its platform, user experience, overall system and ultimately its profitability, we have no qualms with that at all.
Fiverr’s stock fundamentals
While we like Fiverr’s numbers so far, it must be noted that currently, their annual net profit margin is considerably lower compared to the industry average. Specifically, their annual net profit margin is nearly -22% to the industry’s nearly 4%, according to TD Ameritrade’s platform.
While not favorable at all, we suspect that as the company matures with the industry itself and further establishes its dominance in the digital freelance space, their net profit margin will increase and even surpass that of the industry, given some time of course.
Thankfully, as we touched on earlier in regard to the company’s income statement, their annual revenue growth is likely substantially higher than the industry average. What they currently lack in their ability to produce a profit, they compensate for in accelerated, high double-digit revenue growth in recent history.
In addition to revenue growth, Fiverr’s annual return on assets is basically in line with the industry average while their annual return on investment is below the industry average.
We’re not too concerned with the company’s lower annual return on investment because, from our perspective they are likely to benefit from the fruits of their labor in the long term and not in the short or intermediate term.
Have we mentioned the company is in growth mode?
Fiverr’s stock business
While understanding the numbers behind a company are vital to investment success, understanding the general idea of the company you’re considering investing in can be just as important.
After doing some more due diligence on Fiverr, we learned a lot.
First, the company makes a lot of money from transaction fees but also appears to have additional revenue streams such as their subscription-based business model. We think this is a solid and dependable business model for the company, especially given that they take a considerable slice per transaction.
Second, as mentioned earlier we think the gig economy naysayers are wrong. It’s our opinion that consumers of all walks of life have become accustomed to staying at home and working or having a side hustle that supplements their primary source of income. Simply put, if we’re right, Fiverr among other growth companies will stand to benefit handsomely from this phenomenon.
Third, many might not understand that all of the freelancers, buyers, sellers and other parties using the platform are not Fiverr’s employees. From a legal and general liability standpoint, this makes me quite comfortable as an investor. Specifically, some growth companies similar to Fiverr such as DoorDash have the general threat of having to change the status of deliverers from independent contractors to employees as well as threats of unionization and strikes.
It doesn’t seem like Fiverr has to worry about unions or tending to the needs and demands of users of the platform since they don’t technically work for Fiverr; they are the quintessential independent contractors that just happen to be using Fiverr’s platform.
Lastly, look at the gig industry as a whole.
Consumers, buyers, sellers and other entities stand to gain from the democratized nature of business and wider, more globally inclusive exchange of goods for services that Fiverr’s platform has created. Specifically, people all across the world now have the opportunity to use their talents, gifts and developed skillsets to make a living for themselves.
This is very cool to us and is likely to encourage others across the globe to want to profit from their skills while helping businesses, websites and other entities that can leverage outsourced talent.
Should you buy Fiverr stock?
The company already has a strong balance sheet, incredible year over year revenue growth and isn’t burning as much cash as we had initially assumed.
Given the numbers and our opinion of the gig-economy as a whole, we give the company a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.