Should I Buy Fiverr International (FVRR)? Finance YouTuber Analysis

The analyst rates Fiverr as a buy, noting its extremely attractive valuation with a forward P/E of 5.2, which he believes unfairly discounts its future prospects due to AI fears. He highlights its improved operating margin from -30% to 2.6% and suggests that AI could eventually drive more business to the platform as companies seek help implementing AI solutions.

“I like both of them. I think these are attractive stocks when measuring risk versus reward, especially if you have a portfolio that's heavily weighted in artificial intelligence.”

The analyst recommends investing in Fiverr International as a 'picks and shovels' play on the digital products and courses market. Fiverr is an online freelance marketplace where creators sell their services, allowing investors to benefit from the creator economy without directly creating products.

“Instead I like the picks and shovels investment in this idea invest in stocks like online freelance Marketplace Fiverr International ticker fvrr or the online crafts Marketplace Etsy ticker Etsy where creators sell their products.”

The YouTuber recommends Fiverr due to its unique business model, which allows freelancers to post services at set prices, creating a low-cost option for clients. He points to its strong user interface, significant market opportunity, and robust revenue growth (42% in the most recent quarter) as key drivers, making it the cheapest on a growth-adjusted basis.

“shares trade for 16.2 times on that price to sales basis so a little higher than some of these stocks but but with that 42 growth rate it's actually the cheapest on the list”

Travis Hoium argues that the market is overreacting to the threat of AI on Fiverr. He believes that while AI might reduce the price of individual services, it will significantly increase the overall volume of content creation, expanding the market for Fiverr's freelancers. Customers will still seek expertise for AI-assisted content creation, rather than learning to do it themselves.

“I think the market is ultimately overreacting.”

Travis Hoium is cautiously optimistic about Fiverr, citing its continued revenue growth (up 1.5% in Q1 2023) and strong gross margins (over 80%). He notes the company's ability to control operating expenses and increase its full-year 2023 guidance slightly, suggesting resilience in a challenging economic environment. The bullish case rests on the increasing reliance of small businesses on freelance workers, which Fiverr facilitates.

“I'm cautiously optimistic with Fiverr and I'm very encouraged that the company is not declining right now in an environment where you might think they would be coming out of the pandemic.”

The analyst believes Fiverr is undervalued given its significant revenue growth since 2020 compared to its stock price performance. He highlights its strong gross margin, active buyer base, positive free cash flow despite negative net income (due to stock-based compensation), and its position in the structural shift towards freelance work. He suggests the stock is not expensive if the company can execute its growth plans and control operating expenses.

“at the end of the day I think Fiverr is part of a structural change that we're going through in employment and the way that businesses work... not a very expensive stock if the company can execute on its growth plans”

Hoium suggests that Fiverr could benefit from the rise of AI, as it may create new opportunities for 'prompt engineers' and other specialized freelance work. He believes AI could act as a tailwind, driving growth for these platforms by enabling more affordable content creation and increasing the demand for outsourced specialized skills.

“Fiverr and upwork I'm going to give it a couple of quarters to see how this goes but I think this could be a Tailwind behind them.”

The YouTuber believes Fiverr stock is a buy despite its significant drop, arguing that the underlying thesis for remote work and freelance services is not broken. He highlights the company's positive free cash flow, strong gross margins, and increasing spend per buyer, indicating a durable long-term market. Additionally, Fiverr has shown improved financial discipline by reducing R&D and sales/marketing expenses, leading to a more attractive valuation with a price-to-sales ratio of 3.7.

“I think investors may have sold this off a little bit more than is deserved so let's go through not only the company's recent performance but what it said in a recent third quarter earnings report.”