Fiverr Stock Up 3% In October – Time to Buy FVRR Stock?

The price of Fiverr stock has moved nearly 3% in October following a mild recovery the stock experienced the month before as market participants attempted to fill the bearish gap left behind as a result of a disappointing second-quarter earnings report.

Back in August, the company reported weak guidance for the third quarter of the year and that led to a sharp 24% single-day decline amid the perception that the pandemic tailwind that lifted the firm’s performance in 2020 and during the first half of 2021 was possibly fading.

The company is expected to report its financial results for this period on 10 November and thus far the price action has been quite calm ahead of the event.

Meanwhile, Fiverr recently acquired an online learning company called CreativeLive that offers courses from top professionals in areas including design, video, and marketing. The specific terms of the deal were not disclosed to the public. This typically means that the acquisition will have no material impact on the company’s financial performance.

What can investors expect from Fiverr for this fourth quarter of the year and ahead of the release of its Q3 2021 earnings report? In the following article, I’ll take a closer look at the price action and fundamentals of this tech stock to outline plausible scenarios for the future.

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Fiverr Stock – Technical Analysis

The price action for Fiverr stock since the August collapse has been relatively calm except for the September run-up that partially filled the price gap left behind back then.

Trading volumes have exceeded the 10-day average in the past few days upon breaking the descending triangle formation shown in the chart and the stock remains above its short-term moving averages at the moment.

This break is quite encouraging but it is too early to tell if bulls are going to be able to hold their ground unless they fill the price gap entirely. Meanwhile, FVRR stock currently trades 13% below its 200-day moving average. This reflects the market’s negative sentiment toward Fiverr stock as the tailwind provided by the pandemic is expected to fade to some extent.

Momentum oscillators remain relatively stalled as the Relative Strength Index (RSI) is standing at 49.7 while the MACD crossed above the signal line but histogram readings don’t seem to be accelerating just yet.

Based on these readings, the outlook for the stock is bullish as long as the price action remains above the short-term moving averages (20-day SMA at $184.5 and 50-day SMA at $183.3).

Fiverr Stock – Fundamental Analysis

Fiverr revenues have been surging in the past four years but they experienced their most pronounced uptick in 2020 on the back of the pandemic as sales nearly doubled. The health crisis prompted many businesses to rely on the expertise of freelancers from within the platform to complete multiple tasks in an environment that allowed business owners to get more accustomed to working from home and hiring a remote workforce.

For the coming two years, the market seems to be expecting that sales will continue to grow but at a slower pace compared to 2020.

Gross margins for the firm have been steadily rising from around 72% back in 2017 to 82.5% last year while negative GAAP operating margins have been trimmed from 37.5% to 6% last year.

Meanwhile, the firm’s EBITDA remains negative while its free cash flows turned positive for the first time in 2020 at around $15 million.

Fiverr stock is currently being valued at $6.83 billion while its enterprise value stands at $6.5 billion according to data from Koyfin. This results in a forward EV-to-Sales multiple of 20. This ratio is higher than the average EV/Sales of 15.7 assigned to companies within the sector as per data compiled by the Stern School of Business from the NY University.

Based on this multiple, the valuation for Fiverr seems relatively stretched. Meanwhile, being such a young company with no path to profitability in sight just increases the likelihood that the price could experience further declines if its performance fails to live up to the market’s expectations.

With this in mind, this upcoming report will be important to assess the future of the firm in a post-pandemic world. Based on the industry’s average EV/Sales multiple, a fair price for the company would be around $150. At those levels, Fiverr stock may be more attractive, especially upon considering the attractiveness of its business model in a world that is increasingly turning to digital solutions.

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