Investors got very excited about Fiverr International (FVRR -2.00%) stock when lockdowns and social distancing forced everyone to stay at home. The belief was that the company's platform, which connects buyers with content sellers, would be a huge winner.
They were right. That is, until, everything started opening back up.
Fiverr's business has suffered over the past year, and has caused many investors to flee the stock, pushing it down 49% over the past 12 months.
But some investors are wondering whether or not the sell off is opening up a buying opportunity for this gig economy stock. Let's take a closer look at the company to find out.
Image source: GETTY IMAGES.
What's going right for Fiverr
It may not seem like it at the moment, but there are a few things that are going well for Fiverr right now.
For one, the company is successfully tapping into a larger trend toward the gig economy. Statista estimated that by 2027, a majority of the American workforce will be doing some form of freelance work (either exclusively or in addition to their regular job).
Not all of those workers will be working gigs on Fiverr, of course, but Fiverr's management believes that the overall trend toward the gig economy is opening up a total addressable market for the company that's worth $115 billion.
Fiverr currently has 4.2 million buyers on its platform, and the company's take rate -- the percentage of money it keeps from transactions -- is an impressive 30%. For comparison, one of Fiverr's largest competitors, Upwork, has a take rate of just 15.4%.
But despite the large gig economy opportunity and Fiverr's ability to extract a lot of value for itself from platform transactions, there are also some serious headwinds for the company.
What's going wrong for Fiverr
Fiverr may be tapping into a shift in how people work, but that transition has slowed down significantly lately.
Consider that in the third quarter of 2022 the company had 4.2 million active buyers on the platform -- an increase of just 3% from the year-ago quarter.
The company spent $134 million in the first nine months of 2022 on sales and marketing expenses, in part to attract more buyers, and it essentially has nothing to show for it.
Fiverr's sales also point to a troubling trend. The company's revenue increased just 11% in the third quarter to $82.5 million, compared to sales growth of 42% in the year-ago quarter.
Fiverr stock isn't a buy right now
For all of the reasons above, I don't think Fiverr's stock is a buy right now. Sure, the company is tapping into a very large gig economy opportunity, but the company's sales and the number of buyers on the platform aren't growing as they should be.
I understand why Fiverr is tempting for some investors -- especially when you consider that its stock is trading at a price-to-sales ratio of just 4 right now -- but without significant growth from the company I think Fiverr is too risky to put any money toward.
