What Happened?
Shares of online freelance marketplace Fiverr (NYSE: FVRR) fell 11.8% in the morning session after the company reported second-quarter results that revealed a significant drop in active buyers and provided a weaker-than-expected outlook.
Although the online freelance marketplace surpassed revenue expectations for the quarter, investors focused on more concerning trends. The number of active buyers, a key indicator of platform health, fell by 10.9% compared to the same period last year, dropping to 3.4 million. This decline in users overshadowed a 9.8% increase in spending per buyer. Furthermore, the company's guidance for the upcoming third quarter and its full-year EBITDA forecast both came in below analysts' projections. The combination of a shrinking user base and a cautious outlook for future earnings appeared to raise concerns about the company's growth trajectory.
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? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Fiverr’s shares are very volatile and have had 21 moves greater than 5% over the last year. But moves this big are rare even for Fiverr and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 24.3% on the news that the company reported a "beat and raise" quarter. Third-quarter earnings beat analysts' revenue, EBITDA, and EPS expectations. Efforts to improve value-added services paid off as take rate improved and the average spend per buyer rose 9% from the prior year. Notably, Fiverr introduced an AI-powered matching tool for buyers with complex job requirements. As a result, the number of buyers spending over $10K on Fiverr also increased. Given these improvements, the company was able to comfortably raise full-year revenue and EBITDA guidance, which put the business on track to meet and perhaps exceed the three-year targets on Adjusted EBITDA and free cash flow provided in the previous quarter. Holding aside expectations, its number of buyers declined, which is a negative. Overall, though, this quarter was solid.
Fiverr is down 30.9% since the beginning of the year, and at $22.13 per share, it is trading 37.6% below its 52-week high of $35.45 from December 2024. Investors who bought $1,000 worth of Fiverr’s shares 5 years ago would now be looking at an investment worth $241.68.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
