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Why Fiverr International Lost Nearly 19% in June

What happened

Shares of freelance platform Fiverr International (NYSE: FVRR) dropped nearly 19% in June according to data provided by S&P Global Market Intelligence. There wasn't any news specific to Fiverr, but the stock price continues to fall as growth slows down, losses increase, and the market remains hostile toward tech stocks.

So what

Between people returning to offices, difficult year-over-year comparisons, and volatile macroeconomic conditions, Fiverr's business has been decelerating. Sales increased 27% year over year in the first quarter of 2022 after accelerating to 100% year-over-year growth in the first quarter of 2021.

It's making solid progress in almost all areas. Active buyers increased 11% over last year in the first quarter to 4.2 million, and spend per buyer continues to increase, rising 17% over last year to $251. One number that's significant is the take rate, which continues to climb, having risen from 27.2% last year to 29.6% this year. The take rate is the amount of money Fiverr takes from the seller's fee, and nearly 30% is very high for its industry. Competitor Upwork, for example, has a 14.1% take rate, less than half of Fiverr's. That translates into huge amounts of revenue.

Part of the reason Fiverr has been able to successfully charge those kinds of fees is its focus on enterprise clients, or Fiverr business. This is a lucrative subdivision that offers expanded services for large clients, and companies such as Unilever and L'Oréal use the Fiverr business platform.

Now what

Based on macroeconomic uncertainty, management lowered its full-year guidance for 2022 from $376 million to $355 million at the midpoint. Ouch. Fiverr stock was already deteriorating before the first-quarter report, and it fell even more after. It's now down 70% this year.

There are still plenty of catalysts for Fiverr's business in the long term. These include an explosion in remote work, decentralized offices, and "The Great Resignation," which are all feeding into each other as well as Fiverr's workstream.

The market may not recover any time soon, and things may get worse before they get better. If you can handle the risk, it might be a good time to buy Fiverr stock for long-term gains.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fiverr International. The Motley Fool recommends Unilever and Upwork. The Motley Fool has a disclosure policy.


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