Fiverr International Ltd . (NYSE:FVRR) is an Israel-based online marketplace for freelance services. It enables freelancers to sell a variety of digital services to customers in over 160 countries.
During the pandemic, the company benefited greatly from the rise of the gig economy, which is expected to reach $455.2 billion by 2023. The gig economy is an environment in which businesses and independent freelancers engage in short-term employment contracts.
Fiverr seems well-positioned to benefit from the expected growth of this industry, as it continues to invest in improving the platform experience for both clients and freelancers.
Despite the expected hit from the reopening of the economy, I am bullish on the long-term prospects for Fiverr. (See FVRR stock charts on TipRanks)
Fiverr Will Grow with the Industry
With an increasing number of small businesses searching for part-time independent workers, the gig economy is booming, providing employers with both affordability and access to a high-quality pool of talent.
The ability to have a healthy work-life balance is one of the key reasons for the growth of the gig economy, as is the ability to work from anywhere. In developing countries, the use of freelancer platforms has surged by more than 30% in the 12 months that ended last February.
The United States, China, Brazil, Japan, and India have the highest number of gig workers in their workforces. The concept is gaining traction, with leading freelancing platforms assisting gig workers around the world in establishing their businesses.
Fiverr has emerged as one of the preferred platforms because it offers both sellers and buyers an easy and flexible process. In the last two years, Fiverr has outpaced its competitors in terms of growth and market share capture in the freelance industry.
Fiverr reported revenues of $75.3 million for the second quarter, up 60% year-over-year, thanks to a 43% increase in active buyers, and a 23% increase in spend per buyer.
To attract and retain new businesses and sellers, the company is forming strategic partnerships with tech companies such as Salesforce (NYSE:CRM), and Wix.com. Ltd. (NASDAQ:WIX). These partnerships, coupled with a favorable macroeconomic outlook in the long-term, should help Fiverr report stellar earnings growth in the post-pandemic era.
Challenges to Be Temporary Obstacles for Growth
Fiverr can be expected to face some headwinds as the economy recovers and normalcy prevails, prompting employers to request their employees to return to the office.
Company management recently highlighted that the relaxation of pandemic-related restrictions around the world, as well as the recovery in travel, will have a significant impact on the company in the coming quarters.
Fiverr adjusted its guidance for Fiscal 2021 accordingly, and the company now expects revenue to be in the range of $280 million to $288 million, representing a year-over-year growth rate between 48% and 52%.
Even though online activities are projected to decline, owing to pent-up demand for travel and vacations, Fiverr's fundamentals remain intact, and the company still has a lot of revenue-generating opportunities to explore.
Wall Street’s Take
Based on four Wall Street analysts offering 12-month price targets for Fiverr, the average price target comes to $220.50, which implies upside of 9.7% from the current market price.
Fiverr’s financial performance in the remainder of 2021 will give some color on what to expect from the company in the next five years, especially after the massive boost it received due to mobility restrictions and the virus-induced recession last year. With this in mind, it makes sense to closely monitor the revisions to the price targets offered by Wall Street analysts in the coming months.
Takeaway
Fiverr’s continuous investment in its platform to enable more buyers and sellers to participate in the digital economy indicates that its sales and profitability will remain strong over the next five years.
The company is taking market share from its competitors as well, which suggests Fiverr could carve out competitive advantages in the long run.
At the time of publication, Dilantha De Silva did not have a position in any of the securities mentioned in this article.
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