24.1% Upside In This Gig Economy Stock?
One thing the pandemic and resulting Great Resignation have demonstrated well is that the gig economy is here to stay. Sure, there have always been self-employed people and freelancers, but working from home has become the new normal for millions. One gig economy company sits at the center of this tectonic shift: Fiverr International Ltd (FVRR), an Israeli company that’s a marketplace for freelancers of all stripes, connecting them with paying customers.
The Fiverr Story
Founded in Tel Aviv by two serial entrepreneurs, Fiverr has grown steadily over its eleven-year history. Originally, Fiverr was designed to sell services for just five bucks. As demand grew, Fiverr began to change with the times, first letting sellers include add-ons called gig extras. For instance, for an additional $20, some sellers will move you to the top of their work queue. But, by 2013, Fiverr lifted its base price of $5 and began letting sellers charge prices they set themselves. That was the same year the company opened an office in New York City.
Fiverr has been in rapid growth mode from the beginning. It secured its second round of venture capital funding in 2012 for a total of $20 million. By 2014, it had secured another $30 million, allowing it to quickly scale up, including launching websites in Portuguese, Spanish, French, and Dutch.
The next year, Fiverr received an additional $60 million in Series D funding from Square Peg Capital. This raised the company’s total funding to $110 million as of November 2015.
Fiverr Goes Public
Fiverr finally went public in 2019, with each share offered at $21. On June 13, 2019, the first day of its IPO, Fiverr raised $110 million. J.P. Morgan Securities LLC and Citigroup Global Markets Inc. were the lead joint book-running managers of the offering.
As it continued to accelerate its growth, Fiverr began acquiring smaller companies. The first acquisition was in 2017 when Fiverr bought VeedMe, a video creation marketplace. Next on the menu was AND CO., a developer of software for freelancers. Now AND CO.’s offerings are baked into Fiverr’s ecosystem.
The acquisition spree continued, with ClearVoice, a content marketing platform, acquired in early 2019. The following year, Fiverr acquired SLT Consulting, a digital marketing agency. Remarkably, the agency built its business using Fiverr.
In 2021, Fiverr acquired three additional companies: Working Not Working, another creative talent marketplace; CreativeLive, an online classroom for entrepreneurs; and Stoke, for $95 million.
What Makes Fiverr A Top Gig Economy Stock?
First, the gig economy continues to grow. According to Statista.com, the gross value of the gig economy is expected to reach $455.2 billion by 2023. Fiverr’s year-over-year growth reflects this: for each fiscal year starting in 2018, Fiverr has experienced annual growth of more than 40 percent, as well as a gross profit margins of between 79 to 82 percent.
Couple this with the company’s remarkably low operating expenses and it explains why Fiverr is outperforming its competitors. Going forward, Fiverr is expected to grow rapidly. Revenue forecasts over the next few years are impressive:
- 2023: $476.8 million
- 2024: $594.8 million
- 2025: $759.6 million
Beyond a growing gig economy, Fiverr has a top class user experience: it has made it easy and transparent to buy and sell – and critically it has focused on quality vendors. Fiverr Business and Fiverr Pro upscale the Fiverr experience for both freelancers and hiring businesses. Fiverr Pro is an earned designation freelancers must apply for. Fiverr claims only the top 1 percent of applicants earn its Pro status.
Trading at just 5.9x EV/EBITDA, down from 40.2x in 2020, Fiverr may well be on sale right now. Running the numbers shows some significant upside of 24.1% to fair value of $66.97 at the time of research.
