The freelancing-marketplace operator Fiverr International (FVRR) stock is down over 75% from its last year’s highs and over 63% in the past six months. But this stock beat-down does not mean the company itself is broke or lagging on executing a growth strategy. Among the many factors contributing to FVRR’s downfall are the wider macroeconomic instability, geopolitical crisis, and the overall bear market situation.
The S&P 500 Index is currently down roughly 16.4% since January highs, while the Nasdaq Composite Index has placed itself firmly in the bear territory with losses extending to 25% year to date and 13.3% in April alone. Joining in on the downfall, inevitably, is FVRR stock like the many battered down growth and technology stocks among others. This downfall stems from the wider surging instability in both geopolitical and economic setups as Russia continues its war on Ukraine amid rising inflation, soaring interest rates, fueling energy prices, and whatnot.
However, this stock downfall does not mean that the freelance marketplace provider is not performing well. Despite the recent outlook cut down due to the geopolitical crisis, the company’s strong position and growing market warrants a bullish long-term outlook. The cherry on top, the declining share price presents a good bargain while the company holds significant promise for the future.
What’s the Latest?
Recently, on May 11, the company came out with its financial results for the first quarter of 2022. While the earnings and revenue both surpassed expectations, the company’s outlook owing to the Russian invasion of Ukraine and its impacts on the business fell below expectations. Ultimately, the stock plunged by over 22% to near its 52-week low but it did make some recovery afterward.
On May 17, the stock was priced at $41.50 a share in the after-hours following an uptick of 12.50% in the prior session as the company shared news regarding an investor conference presentation.
FVRR’s Q1 2022 Results Analysis
Despite growing concerns over the sustainability of the freelance market post the pandemic uptick as economies open doors, the company surpassed both its earnings and revenue estimates and delivered continued improvement.
The March quarter revenue went up by 27% YOY to $86.7 million, surpassing the consensus estimate by 0.33%. Continuing to attract clients, FVRR’s active buyers rose by 11% YOY to 4.2 million while spending per buyer surged by 17% to $251.
The quarterly earnings beat the consensus estimate of $0.04 per share by 175% at 11 cents, while the year-earlier earnings were a loss of $0.01 per share.
The adjusted EBITDA marked an improvement to the positive side with $3.9 million against a negative $0.7 million in the comparable period.
However, the non-GAAP gross margin declined by 60 basis points to 83.5% which is still a stellar figure.
Given that a huge number of employers and freelancers on the platform are based in Russia and Ukraine, the geopolitical situation in the region and its impact on Europe had the company revise its guidance. According to the company’s revised guidance, it expects:
|Guidance||Q2 2022||FY 2022|
|Revenue||$86.0-$87.5 million||$345.0-$365.0 million|
|YOY Growth||14-16% YOY||16-23% YOY|
|Adjusted EBITDA||$3.0-$4.0 million||$10.0-$17.0 million|
Analysts’ revenue estimates for the ongoing Q2 2022 are $92.02 million and $376.92 million for the full year. However, despite the critical market situation and impacts of the war in the region, a 14-16% growth for the ongoing quarter and 16-23% for the full year still show solid momentum.
FVRR Company Growth & Market Analysis
FVRR has continued its efforts to build a one-stop solution for freelancers, while its fundamentals keep improving rapidly. The company has opened over 25 new categories to expand its total addressable market while also diversifying revenue streams. From the latest addition of AI Auditions for artists to categories like NFT and 3D content generation services, the company has been capitalizing on the growth of new trends as they emerge to keep up with the demand explosion in these categories.
Since the company started posting financial data, its number of active buyers, as well as their average yearly spend, have been increasing by double-digit percentages.
A further fundamental strength of the company comes from challenging economic conditions. As economies face slowdowns and people find more free time on their hands, freelance, the so-called gig economy booms. The gig economy, while already disrupting the traditional job market, thrives on tougher economic conditions. Slim pockets accelerate attention to freelance work thus, the ongoing economic instability and looming threat of a recession just might tick up the market some more after the pandemic boom gave way to worries about its future.
While the competition is tough with names like Upwork at large in the market, they share similar problems from the impact of the Russia-Ukraine conflict. However, with positive cash flows, unique tools, and continuous additions that help collaboration between buyers and freelancers, FVRR has a good chance of remaining at the top.
The freelance or gig economy is not going anywhere despite the concerns regarding its sustainability post the pandemic hype. Just the U.S. addressable market is estimated to be over $100 billion in annual freelance services revenue. Therefore, with a huge market opportunity and continued upbeat performance, FVRR’s fundamentals remain strong despite the current blows from the Russia-Ukraine conflict and its stock decline. With its tendency to capitalize on economic instability, FVRR can even be deemed as recession-resistant technology stock, which brings further hope for a bright future in spite of the looming recession overhead.