New AI Initiatives Like The Company Go Will Improve Freelancer Productivity And Engagement

Key Takeaways

• Fiverr's focus on personalized AI tools and platform expansions aims to boost freelancer productivity and drive revenue growth through enhanced marketplace engagement.
  
• Targeting larger projects and launching generative AI platforms seeks to improve margins, attract developers, and open new monetization channels.
  
• Heavy investment in AI and macroeconomic dependency pose risks to Fiverr’s revenue growth and margins amidst potential reduced need for human freelancers.

Catalysts

Operates an online marketplace worldwide.

• Fiverr plans to leverage Fiverr Go, a new platform for personalized AI tools, to improve freelancer productivity and earnings potential, potentially increasing revenues through higher marketplace engagement.
  
• The expansion of Fiverr's Services revenue, including Fiverr Ads, Seller Plus, and AutoDS, is expected to drive overall revenue growth, with Services revenue projected to contribute over 30% of total revenue in 2025.
  
• Fiverr's initiatives targeting larger projects and buyers, such as Fiverr Pro and Dynamic Matching, aim to improve net margins by focusing on quality revenue and penetrating upmarket opportunities.
  
• Launching an open developer platform for generative AI applications can enhance future earnings by attracting a developer ecosystem, expanding capabilities, and creating additional monetization avenues through the marketplace.
  
• The freelancer equity program is designed to incentivize top talent, which may improve overall platform engagement and loyalty, indirectly supporting revenue growth by retaining high-value freelancers.

Fiverr International Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Fiverr International's revenue will grow by 10.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.7% today to 8.0% in 3 years time.
• Analysts expect earnings to reach $42.2 million (and earnings per share of $0.98) by about March 2028, up from $18.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $71.9 million in earnings, and the most bearish expecting $18.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.9x on those 2028 earnings, down from 49.6x today. This future PE is greater than the current PE for the US Professional Services industry at 21.7x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.75%, as per the Simply Wall St company report.

Fiverr International Future Earnings Per Share Growth

Risks

• Fiverr is heavily reliant on macroeconomic factors, and any sustained economic downturn could affect the demand for freelance services and thus impact Marketplace revenue growth.
  
• There's pressure on Fiverr's earnings as it continues to invest heavily in AI tools and other technologies like Fiverr Go, potentially affecting net margins in the short term.
  
• The advancement of AI technology could pose risks to Fiverr’s business model by potentially reducing the need for human freelancers, which may impact revenue derived from transaction commissions.
  
• With an increased focus on larger buyers and complex projects, if Fiverr fails to capture this upmarket segment effectively, it could limit revenue growth from this strategy.
  
• Fiverr's growth outlook assumes a macroeconomic rebound, suggesting that should the macro environment fail to improve, it could pose a risk to both revenue and earnings projections.

Valuation

• The analysts have a consensus price target of $35.222 for Fiverr International based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $41.0, and the most bearish reporting a price target of just $31.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $526.3 million, earnings will come to $42.2 million, and it would be trading on a PE ratio of 30.9x, assuming you use a discount rate of 9.7%.
• Given the current share price of $25.22, the analyst price target of $35.22 is 28.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.