What Happened: Shares of online freelance marketplace Fiverr (NYSE:FVRR) fell 14.9% in the afternoon session after the company reported fourth-quarter results that missed analysts' revenue expectations as user growth stalled. Revenue and adjusted EBITDA guidance for the next quarter and full year also fell below consensus estimates. The company cited a challenging macro environment in 2023: "US job openings down 19% and professional staffing down 6% year-over-year." On the other hand, free cash flow seems to be heading in the right direction. Overall, this was a weaker quarter for Fiverr.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Fiverr? Find out by reading the original article on StockStory.
What is the market telling us: Fiverr's shares are very volatile and over the last year have had 38 moves greater than 5%. But moves this big are very rare even for Fiverr and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 24 days ago, when the company gained 7.6% as yields fell after the U.S. Treasury Department lowered the borrowing estimate for the first quarter of 2024. According to a press release, the Treasury Department is expected to borrow $760 billion, $55 billion lower than the $815 billion estimate provided in October 2023, due to "projections of higher net fiscal flows and a higher beginning of quarter cash balance."
Stocks have trended higher since late 2023 as market participants anticipated that the Fed would begin to cut rates in 2024, after recent economic data showed that inflation is cooling off. The first policy decision will be announced on January 31, 2023, with the consensus expectation for rates to remain steady at 5.25%-5.5%.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Fiverr is down 15.6% since the beginning of the year, and at $22.13 per share it is trading 50.7% below its 52-week high of $44.89 from February 2023. Investors who bought $1,000 worth of Fiverr's shares at the IPO in June 2019 would now be looking at an investment worth $554.51.