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Fiverr: Beware Of Downside As Valuation Remains Excessive


  • Fiverr reported a strong Q4 with revenue growing 89%, coming in nicely above expectations.
  • Management provided 2021 revenue guidance of 46-50% growth and while this remains strong, it shows quite a bit of deceleration from 2020 growth of 77%.
  • Recent rumors of LinkedIn entering the freelance space as early as September could cause increased competition in coming months.
  • As the economy continues to reopen and more individuals rejoin the labor market, there could be overall less demand for freelance work.
  • Valuation remains quite lofty at nearly 27x 2021 revenue.

Fiverr (NYSE:FVRR) reported a solid Q4 earnings in mid-February and their 2021 revenue guidance of 46-50% continues to demonstrate strong performance, albeit at a decelerating pace from 2020 levels (source: company presentation).

With a massive run-up in the name prior to Q4 earnings, it's no surprise the stock has retracted from the ~$320 highs and has moved towards $200. Despite the significant pullback, valuation continues to remain a little lofty at ~26.8x 2021 revenue, or ~15x my 2023 revenue estimate (assuming 30-35% growth in 2022 and 2023).

Fiverr is one of the leaders in providing a platform for freelance workers to connect with buyers. Given their software platform model, gross margins remain quite high at nearly 85%. The global pandemic caused the freelance and gig economy to rapidly grow over the past year as individuals who lost their full-time positions looked for alternative income.

The company has several growth opportunities in their near-term horizon, including continuing to build out their platform and content in addition to international expansion. While revenue growth could remain well above 30% for the next several years, the company is likely to face some increased pressures.

Competition continues to rise and with the potential for LinkedIn to become a direct competitor, freelance workers will have multiple platforms to work off of. In addition, the US labor force continues to improve as more individuals return to work, thus taking away potential freelance demand. More people are inclined to look for freelance work when they are not already pre-occupied with a full-time job.

There are likely going to be many winners in the freelance economy, and while Fiverr could be one of them, their valuation is already pricing in success.

Despite the near 35% pullback in recent weeks, I believe there could be continued downside to the

This article was written by

Individual investor with hands-on experience in the equity markets. Largely focusing on Tech companies or major mispricings in the market.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (13)

Daytrader77 profile picture
A bubble territory is when a share price is justified by trading on multiples not of profits but by revenues...

This will be your last chance to take profits..

institutions and fund managers has long abandoned this stock..
@Daytrader77 give us a break..
Daytrader77 profile picture
@Stock_tracker is taking profits now not a break.. while you're still in a green?
jasmine4657 profile picture
@Stock_tracker he was right. you just didn't realize it.
Daytrader77 profile picture
Next support $100
Appears to have formed a cup and handle formation on the chart. Market has recently rotated back into growth and more speculative names like FVRR will most likely see buying return soon after growth stocks that have more reasonable valuations get bid up, ie FB, especially as we head into earnings season. Shorting out of the money puts like May 21st 200's or 210's look very attractive right now as I believe the stock will move up to fill the March 2nd-3rd gap.
Daytrader77 profile picture
It is too late at this level...

The reason the market has gone parabolic is people are pricing optimistism too much..

We go balistic that a company has increased revenue even though it has little to no profits..

Your $225 has a return of negative -30% or -$1.50 per year.. So it would take 1.55K years to get your money back and that is not even guaranteed.

Fiverr was trading at $15 in 2019. And $30 at May 2020.. and that was when the market was so generous.. now look at the new IPO companies.. palantir, roblox, among others..

It didn't have a real correction yet..
You’re dreaming if you expect to buy FVRR @ $150/share. Buy it on dips to 220, 215, 210 because it will be 280-300 within 9-12 months..
Daytrader77 profile picture
@drbob512 No $150 is the only initial downside..

It will eventually Settle at $30-44..
jasmine4657 profile picture
@drbob512 you don't have to dream anything to buy it at $150 now. You can buy it at $90.
Business0wner profile picture
"For example, as the restaurant and travel industries begin to recover, individuals who go back to work will become less reliant on freelance work and/or might not have the available time"

So these workers will work from restaurants and from airports? The quicker the economy reopens the more gigs there will be available.

Think outside the box, where do you see fiverr in 5 years? Being a marketplace solely for gigs? Please, think again.
Once you have the marketplace, you're past the hardest thing you had to achieve. The ways you can monetise that marketplace are endless.
given the exponential trajectory of the TAM, that 60% of NA will draw some income from freelancing by 2030 (see McKinsey), and the company’s margins and localized strategy, and has only raised guidance and beat numbers, we believe the stock is cheap on a long-term basis. Next 12 months will be whatever. Next 3-5 years, this is a $500 stock on sale today. also, FVRR is not UPWK and vice versa. This article narrowly discusses numbers, not the depth of what they’re doing. Long and this is a buy on any significant pullback.
Daytrader77 profile picture
@l_s_analyst wow $500..
For a revenue of $34M, negative -37% margin and EPS -$1.07.

and No profit in sight?
That's superly insane valuation..

Even at this level is insane..
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