Perhaps the largest change to the way we live our lives after the COVID-19 pandemic is in how we view work and the office. Millions of people around the world stopped going into offices for the last 12-18 months and learned how to work from their homes. Not only did staying indoors during the pandemic lead to a near global realization that the internet has allowed most office work to be conducted remotely, but people also had time to pursue other interests. Enter the freelancing market, where side hustles became a regular way to supplement income as we worked from home. Learn more
Fiverr (NYSE:FVRR) is one of the global leaders in freelancing services and was one of the shining stars of the COVID-19 pandemic. Fiverr is a relatively young company having only been in operations since 2010, and making its debut on Wall Street in 2019. Since then, the stock has caught fire with a 52-week trading range of $68.12 to a staggering $336.00 per share at its all-time high price level. Can Fiverr continue to dominate the freelance industry and return phenomenal gains for investors?
Fiverr Analysis: We won’t sugarcoat it, Fiverr is trading at a high multiple right now with a price to sales ratio that rivals most software companies. Is Fiverr a tech company? It is certainly an online platform that allows for digital transactions between buyers and sellers. Fiverr is also undergoing rapid growth with a 100% year over year revenue gain in its most recent quarter. The company recently estimated that the global freelance market has a total addressable market of $115 billion with an estimated $815 billion in estimated U.S. total freelancer income.
Fiverr is working to be a complete end to end platform for buyers and sellers, and has added several new programs that benefit both parties. They have added Learn, which is an e-learning platform that helps sellers work towards maximizing their efficiency as well as tools like organization, marketing, and increasing demand for their gigs. These courses are paid courses, so Fiverr has established its own internal recurring revenue stream.
Fiverr has also added And.CO which is another recurring revenue for a paid platform that provides sellers with business management. ClearVoice was an acquisition Fiverr made in 2019, which is another subscription based service that provides content marketing for medium to large sized businesses, and Promoted Gigs is a way that sellers can pay to have their gigs show up in more searches across the platform.
Fiverr takes quite a large cut from the seller and the buyer for every gig. The breakdown is as follows: the seller charges $100.00 for a gig, the buyer pays $105.50, and when completed, Fiverr pays the seller $80.00. This is still good income for the sellers, but what happens if a larger company comes in and undercuts Fiverr? If Facebook came and only charged 10% of each gig, what loyalty would sellers have to Fiverr’s platform? That’s one long-term concern for Fiverr.
Fiverr has several serious competitors including Upwork (NASDAQ:UPWK), although generally the two platforms target different audiences. On Fiverr, buyers can place an order with a seller anytime they want. On Upwork, there is an application process, as well as additional interviews and portfolio reviews. Upwork makes it seem more like a job, whereas Fiverr is a casual business relationship.
So how will Fiverr do? As long as no bigger players enter the market to undercut fees, Fiverr should be able to continue to dominate. It now has the brand name most closely associated with freelancing, and is providing monster growth year over year. Sure it is trading at a price to sales ratio of 40, but if it can continue this growth, it’s high valuation may just be justified. The working world has changed forever, and Fiverr is at the center of the industry that is just getting started in terms of its long-term growth.