It’s been a rocky start to the year for Fiverr stocks. After a promising start to 2019, the company’s share price took a hit in March after it released its fourth-quarter results. Since then, the stock has been on a roller coaster ride, with investors trying to figure out where it will go next.
So far this year, Fiverr’s stock is down about 27%. But is this just a blip on the radar, or is something bigger going on? Let’s take a closer look at what’s been going on with Fiverr and see if we can figure out where the stock is headed.
Fiverr had a strong fourth quarter, but fell short of expectations
Fiverr’s fourth-quarter results were actually pretty good. The company reported revenue of $66.7 million, which was up 58% from the previous year. Adjusted EBITDA came in at $11.5 million, which was also up 58%.
However, while Fiverr’s results were good, they were not great. Wall Street was expecting even more from the company, and when Fiverr missed those expectations, the stock took a hit. In particular, analysts were expecting Fiverr to report higher gross margins than it did.
The company’s guidance for the first quarter was also a bit light, with Fiverr saying that it expects revenue to be in the range of $68-$70 million. That was below analyst expectations of $71.5 million.
What’s driving Fiverr’s growth?
One of the things that investors have been most excited about with Fiverr is its growth prospects. The company is benefiting from strong growth in the freelance economy, which is only getting bigger as more and more businesses look to save costs by hiring freelancers instead of full-time employees.
Fiverr is also expanding beyond its core platform into new areas such as enterprise services and marketing services. This diversification should help the company continue to grow even if there is a slowdown in the overall freelance economy.
What are the risks for Fiverr? While there are plenty of reasons to be bullish on Fiverr, there are also some risks to consider before buying shares. One big risk is that competition could heat up in the space.
UpWork (NASDAQ: UPWK) and Freelancer (NASDAQ: FLN) are both large players in the freelance economy and could quickly steal market share from Fiverr if they start to aggressively compete on price or features. Another risk is that the overall economy could weaken, which would lead businesses to cut back on their spending on freelance services. This would obviously be bad news for Fiverr’s business.
Finally, it’s worth noting that Fiverr has yet to turn a profit on a GAAP basis. The company is still investing heavily in growth initiatives and it may be awhile before it starts generating meaningful profits for shareholders.
Conclusion
So will Fiverr stocks recover? It’s hard to say for sure.
The company faces some significant risks that could weigh on its business going forward. However, it also has some strong tailwinds working in its favor such as the growing freelance economy.
The stock of Fiverr International Ltd. (FVRR) has taken a beating in recent months, losing over 60% of its value since mid-February 2020. The fall has been attributed to the Covid-19 pandemic, which has resulted in a decrease in demand for the company’s services.
However, there is reason to believe that Fiverr’s stock may recover in the coming months. The company has been quick to adapt to the new reality of the pandemic, launching new products and services that are designed to help businesses cope with the challenges of operating during a pandemic.
In addition, Fiverr has been aggressive in its marketing efforts, launching a major advertising campaign in May 2020 that is designed to increase awareness of the company’s brand.
Given these factors, it is possible that Fiverr’s stock will recover in the months ahead. However, investors should be aware that there is no guarantee of success and that the stock could continue to decline if the pandemic worsens or business conditions do not improve as expected.
Only time will tell how this all plays out but investors should definitely keep an eye on this stock.
