Where will Fiverr stock be in five years?

With the stock down 92% from its all-time high of $323 reached in February 2021. Fiverr (FVRR 0.24%) It is one of several pandemic-era winners that quickly lost support on Wall Street as economic conditions normalized. But is the company’s record low a buying opportunity or a warning to investors to stay away? Let’s discuss what we can do in the next five years Have Visit our store for this broken business.

What’s wrong with Fiverr?

Founded in 2010, Fiverr is an Israel-based freelancing platform designed to connect remote workers with those in need of their services. Competitive platforms, e.g. Upwork) Where customers post jobs and receive offers, Fiverr’s talent offers their services for a set price. This system makes Fiverr more convenient by streamlining the selection process. both workers and customers.

Not surprisingly, Fiverr’s business model benefited during the COVID-19 work-from-home boom, as small businesses lost access to in-person employees and people turned to working from home to make extra money. however Present The company’s work has slowed down significantly.

Fiverr’s first-quarter revenue increased slightly by 6.3%. year after year At $93.5 million, that’s not a lot to look forward to. but, operating loss It decreased from $7.1 million to $4.1 million, suggesting that the company is slowly moving in the right direction.

What will happen in the next five years?

Despite the surprising stock price decline and operating losses, Fiverr remains in relatively strong financial shape. With over $370 million in cash and marketable securities on its balance sheet, bankruptcy is not a current risk. And the company can maintain operations indefinitely without being overly dependent on external sources of capital, such as debt or equity dilution.

In fact, Fiverr is so well capitalized that it can splurge on luxuries such as: Buy back shares. In the first quarter, management approved a stock buyback program aimed at canceling $100 million worth of company stock. Investors often like buybacks because they allow them to increase the underlying value of the remaining shares relative to earnings and cash flow. But when it comes to Fiverr, you shouldn’t get too excited.

Image source: Getty Images.

Share buybacks make the most sense when a company is generating significant profits. However, Fiverr is returning cash from its balance sheet, which could be reinvested in the business or used to pursue synergistic acquisitions. Potential effects of share buybacks canceled The company’s stock-based compensation totaled $19 billion in the first quarter alone.

Over the next five years, Fiverr will need to focus on generating real business growth instead of gimmicky share buybacks. actually If a company’s stock price continues to rise, its value could be destroyed. refuse.

generative artificial intelligence (AI) is also a long-term headwind. can allow To save clients money on work that previously required freelancers. for. These challenges may become increasingly serious as AI technology advances in the future.

Is Fiverr stock a buy?

Losses are narrowing despite modest sales growth, There is a huge amount of cash on the balance sheet, Fiverr stock is not a buy. especially Because as AI technology improves, business models erode.

of the company large in size The share buyback program is not encouraging because it suggests management is running out of ideas to reinvest in the business. stock looks like a possibility perform poorly S&P 500 For the next five years and possibly beyond, investors should stay away.