Fiverr (FVRR) stock fell over 24 percent on Aug. 5 and was among the biggest losses of the day. After the plunge in the stock, it has turned negative YTD and is down 48 percent from the 52-week highs that it hit earlier in 2021. What happened to Fiverr stock and why did it fall sharply? Will it go back up?
Fiverr is an online marketplace for freelancers. The demand for its services spiked in 2020 amid the COVID-19 pandemic. It was among the companies that benefited from changed consumer and corporate behavior amid the pandemic.
Fiverr stock has risen sharply since the IPO.
Fiverr went public in 2019 and priced the IPO at $21 per share. The stock surged 90 percent on listing day and continued to rise in 2020 amid the rally in tech and growth names. However, the stock has fallen in 2021.
There has been a sell-off in growth names, especially the growth names that saw a bump in their top line in 2020. The demand surge in 2020 isn't sustainable for a lot of companies and Fiverr’s earnings release only underlined the fact.
Fiverr reported an earnings beat in the quarter.
Fiverr reported revenues of $75.3 million in the quarter, which were up 60 percent over the same quarter in 2020. The earnings were also ahead of analysts’ estimates. The company’s non-GAAP EPS of $0.19 was also higher than the $0.14 that analysts were expecting.
However, the company provided tepid guidance for the third quarter and expects to post revenues between $68 million and $72 million in the quarter. This would mean a sequential fall in revenues and a YoY growth of 38 percent at the top end of the guidance.
In fiscal 2021, the company expects to post revenue growth of between 48 percent and 52 percent. In the earnings call for the first quarter of 2021, Fiverr said that it expects its revenues to rise between 59 percent and 63 percent in the year.
Commenting on the new guidance, Fiverr said, “As COVID restrictions are lifted in many parts of the world, people are spending more time out of home and less time on screens. The reduced online activity translates into more modest new customer cohorts and less activity for older cohorts.”
What happened to Fiverr stock?
Concerns about a growth slowdown triggered a sell-off in Fiverr stock. Several other companies including FAANG names like Facebook, Amazon, and Netflix have provided soft guidance because the boom of 2020 isn't sustainable for a lot of companies.
Wall Street analysts have also taken note of the growth slowdown. Several brokerages lowered FVRR's target price after the earnings release. Goldman Sachs lowered its target price from $296 to $257, while Needham lowered its from $220 to $220. RBC also lowered Fiverr’s target price from $235 to $200.
The biggest cut came from JMP Securities, which lowered its target price from $300 to $225. The target price downgrades further added to the gloom for Fiverr stock.
Fiverr stock forecast
According to the data compiled by MarketBeat, Fiverr has an average target price of $231.33, which is a premium of almost 30 percent over the current prices. The stock has six buy ratings, one hold rating, and one sell rating.
Fiverr stock now trades at an NTM EV-to-sales multiple of 18.6x. The multiples look reasonable based on the long-term growth story and the company’s high-margin business. Fiverr stock was trading higher in the early price action on Aug. 6 and might recoup some of its losses.