In the current climate it is unusual to come across a company expecting to beat first quarter estimates, but that’s just what digital marketplace Fiverr anticipates (FVRR).
Although the final numbers have yet to be confirmed, the company forecasts better than expected results in its next quarterly statement (due early May). Accordingly, following the update, Needham analyst Brad Erickson increased estimated EBITDA in Q1 from $4.4 million to $5.0 million, along with increasing projected revenue for the period from $32.5 million to $33.3 million.
Following the initial COVID-19 impact, midway through March, activity on Fiverr’s marketplace tumbled by 10% to 15%, steadied thereafter, and by early April “robust” growth returned. Offsetting slower “digital marketing and business verticals” were stronger trends in ebooks, video and animation freelance work, along with the resumption of “organic new customer” additions.
Moreover, the past few weeks have seen record numbers of new freelancers signing up to the platform, and the company has started implementing new sub-categories catering for work & learning from home.
Erickson believes Fiverr’s combination of “attractive secular narrative around the gig economy” and “purposefully fragmented structure,” is under-appreciated by the Street. The analyst believes that should there be any setbacks “post COVID-19” in the second half of the year, these could be offset again by the renewed spend in digital marketing.
Ercikson said, “It’s too early to say in a presumptive return to ‘normal’ in 2H whether a rebound in recently weak categories would fully be able to offset categories that are strong at the moment (thus no change to our out-period estimates), however, clearly the company appears as well hedged as any in our space during these times, and with its strong balance sheet, asset light model and minimal cash burns, we’d think the name could continue to attract incremental buyers.”
All in all, The analyst reiterated a Buy rating along with a $38 price target, which implies about 25% upside from current levels. (To watch Erickson’s track record, click here)
The rest of the Street remains cautiously optimistic concerning Fiverr’s prospects. A Moderate Buy consensus rating is based on 4 Buys and 3 hold ratings. The average price target hits $36.29 and implies potential upside of 20%. (See Fiverr stock analysis on TipRanks)