On Monday, BTIG adjusted its stance on Fiverr International Ltd . (NYSE:FVRR) shares, shifting from a "Buy" to a "Neutral" rating. The firm cited a 35% stock rally over the past week and a 29% increase since the end of June as contributing factors to the new assessment. Fiverr, previously BTIG's top pick for the second half of 2024, has seen significant performance, surpassing the S&P 500's 5% return during the same period.
The analyst highlighted three recent developments that prompted the reevaluation: a less optimistic forecast for small and medium-sized business (SMB) hiring recovery by FY25, potential risks posed by recent advancements in artificial intelligence, and a deceleration in freelancing activity following a mid-summer surge. These factors have led to a reassessment of Fiverr's growth potential and its valuation.
Fiverr's valuation, which has reached 10 times its forecasted FY25 Adjusted EBITDA, is now considered fair by BTIG, reflecting the three concerns mentioned and an overall modest Gross Merchandise Volume (GMV) growth projection of 1% for FY25.
The analysis also noted that the consensus for FY25/FY26 Adjusted EBITDA has increased by less than 2% in the past week, implying that the stock's recent gains are largely attributable to an expansion in its multiple.
Furthermore, when accounting for Fiverr's above-average stock-based compensation, the shares are trading at a rate comparable to the e-commerce sector's average of 12-13 times EBITDA. With the stock's recent performance, BTIG sees a balanced risk-reward scenario, which supports the neutral position. Moreover, the firm has concluded its designation of Fiverr as its top pick for the latter half of 2024.
In other recent news, Fiverr International Ltd. has been experiencing steady growth despite macroeconomic challenges. The company's third-quarter results surpassed expectations, with a reported 8% year-over-year increase in revenue, reaching $99.6 million.
Adjusted EBITDA for the same period stood at $19.7 million, reflecting a 19.7% margin. These positive results have led Citi to maintain a Buy rating on Fiverr, raising its price target to $39.00 from the previous $36.00.
The company's performance is attributed to a stabilizing economic environment, increased engagement from high-quality buyers, and a higher take rate due to the growing adoption of value-added services.
Fiverr's strategic shift towards becoming a hiring platform rather than just a marketplace appears to be gaining traction, with investments in new tools like the Profession-Based Catalog, Hourly-Based Contracts, and Dynamic Matching facilitating this transition.
These recent developments indicate a promising direction for Fiverr, with an emphasis on product innovation and targeting larger enterprises. Despite a challenging macroeconomic environment, the company's take rate continues to increase, contributing to expanding EBITDA margins. As Fiverr continues to evolve and adapt, investors can anticipate further growth in the company's future.
InvestingPro Insights
Recent data from InvestingPro adds context to BTIG's decision to downgrade Fiverr International Ltd. (NYSE:FVRR) from "Buy" to "Neutral." The company's market capitalization stands at $1.07 billion, with a P/E ratio of 112.06, reflecting the high valuation concerns mentioned in the analysis.
InvestingPro Tips highlight that Fiverr "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations," which may provide some financial stability amidst the concerns about SMB hiring recovery and AI risks. Moreover, the "impressive gross profit margins" of 82.65% for the last twelve months ending Q3 2024 underscore the company's operational efficiency, despite the challenges outlined in the article.
The stock's recent performance aligns with InvestingPro data showing a "significant return over the last week" of 22.72% and a strong 24.91% return over the last month. This rapid appreciation supports BTIG's rationale for the downgrade, as the stock may have outpaced its near-term growth prospects.
Investors seeking a more comprehensive analysis can access 18 additional InvestingPro Tips for Fiverr, offering deeper insights into the company's financial health and market position.
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