The gig economy, ushered into the mainstream by giants like Uber Technologies Inc. and supercharged during the COVID-19 pandemic, is experiencing a profound transformation. Lockdowns have accelerated the shift toward remote work, flexible office arrangements, and the rise of virtual meetings (hello, Zoom Video Communications Inc.). This combination has created the perfect conditions for the gig economy to flourish, offering workers unprecedented independence, choice, and income opportunities in an uncertain economic landscape. In this article, we explore two key players in the gig economy and how they may thrive in times of economic slowdown.
Fiverr International: A Gig Marketplace
Fiverr International, once riding high with its stock hitting $336 in February 2021, endured a substantial decline, losing 92% of its value to reach $24.59 by October 2023. The company operates a global online marketplace for gig work, connecting buyers seeking affordable services with freelancers willing to offer their expertise. The unique selling point? Gigs on Fiverr start as low as $5, which explains the platform’s name. Fiverr plays matchmaker between buyers and sellers, collecting fees on every successful transaction.
Fiverr’s freelancers offer a diverse range of services, from logo design, SEO, video production, website development, coding, and graphic design to artificial intelligence (AI) and legal work. The platform also offers a premium service, featuring top freelancers under Fiverr Pro. Fiverr charges a 20% commission on the first $500 of a project and 5% thereafter, with Fiverr Pro commissions set at 10%.
Criticisms of Fiverr
Fiverr, however, is not without its critics. Both buyers and sellers have voiced concerns. While $5 might seem like a bargain in certain parts of the world, it may not go far in countries with a higher cost of living. Language barriers can also be an issue when dealing with overseas talent. Buyers have reported that $5 services are often upsold, and sellers lament the competitive race to the bottom, driven by lower-priced overseas labor. Some see the platform as a content mill, with freelancers relying heavily on software or AI to churn out tasks at rock-bottom prices.
Steady Growth Amid Challenges
Despite these challenges, Fiverr reported Q2 2023 earnings of 49 cents per share, surpassing estimates by 12 cents. Revenues also saw a 5.2% year-over-year increase, reaching $89.4 million, slightly beating consensus estimates of $89.26 million. As of June 30, 2023, the company boasted 4.3 million active buyers, mirroring the figures from the year-ago period. The take rate, which represents Fiverr’s share of each transaction, rose to 30.7%, up by 90 basis points from the previous year. The spend per buyer increased to $265, marking a 2% growth from the same period in the previous year. The company’s gross margin under the Generally Accepted Accounting Principles (GAAP) stood at 82.5%, up 310 basis points from the previous year.
In-Line Guidance for the Future
Looking ahead, Fiverr provided guidance in line with analysts’ estimates. For Q3 2023, the company expects revenues ranging from $89.5 million to $92.5 million, compared to the consensus estimate of $90.73 million. This represents 8% to 12% year-over-year growth. Additionally, adjusted EBITDA is forecasted to be between $14.5 million and $16.5 million. For the full year 2023, Fiverr anticipates revenues of $358 million to $365 million, in contrast to the consensus estimate of $361.35 million. This outlook signifies a 6% to 8% year-over-year growth, with adjusted EBITDA expected to fall within the range of $56 million to $60 million.
Double Bear Flags in Fiverr’s Journey
A closer look at Fiverr’s daily candlestick chart reveals the formation of a double bear flag pattern between September 2022 and October 2023. This pattern led to a breakout at $24.11. The daily relative strength index (RSI) is on an upward trajectory, breaching the 40-band. Key support levels to watch are at $22.50, $22.05, $21.52, and $20.66.
Upwork: The Premier Freelancer Platform
The crown for the world’s largest freelancer platform goes to Upwork, a product of the merger between Elance and oDesk in 2014. Upwork sets itself apart with higher-priced gigs, making it a platform of choice for professionals and corporations seeking a broader array of services. However, it’s worth noting that Upwork takes a larger cut of the transactions, including a commission, a buyer fee, and optional subscription fees for freelancers.
The Upwork Differentiation Strategy
If Fiverr is akin to the “Dollar Store” of gig work, Upwork can be considered the “Walmart” of the industry. In July 2023, Upwork introduced its AI Services Hub and joined forces with Microsoft partner OpenAI to establish a roster of experts on the Upwork platform. The company’s goal is to become the go-to destination for AI-related talent and projects.
Success in Differentiation
Upwork’s differentiation strategy has proved successful. The company reported Q2 2023 earnings of 10 cents per share, surpassing analyst expectations by 10 cents. Revenues experienced a 7.5% year-over-year increase, reaching $168.6 million, outperforming consensus estimates of $162.53 million. Upwork boasts over 18 million freelancers and serves five million clients.
Upward Revisions and Projections
Upwork has revised its Q3 2023 earnings guidance, forecasting a range of 9 cents to 11 cents per share, compared to the consensus estimate of 8 cents. Revenues are anticipated to fall between $165 million and $170 million, outperforming the $165.73 million analyst estimate. Furthermore, the company has raised its full-year 2023 earnings estimates to 36 to 39 cents, surpassing the 26 cents consensus estimate. Revenues for the full year are projected to range from $665 million to $675 million, beating the $661.33 million analyst estimate.
A Promising Chart for Upwork
Upwork’s stock experienced a surge from $9.97 to a peak of $15.88 following the release of its Q2 2023 earnings. Since then, it has retraced to the daily market structure low (MSL) trigger at $10.39. The daily candlestick chart illustrates the formation of a major cup and handle pattern. While the cup lip line began after reaching a peak of $15.78 on September 21, 2022, and plummeting to a low of $6.56 on May 3, 2023
Exploring Other Investment Options
While Fiverr International remains a “Moderate Buy” according to analysts, top-rated analysts have their sights set on different stocks. Gnews24x7 regularly tracks Wall Street’s most highly-rated research analysts and their stock recommendations. While Fiverr International may not make their list, there are five other stocks that top analysts are quietly advising their clients to invest in before the broader market catches on. For income-generating portfolios, consider these ten stocks to secure a reliable and safe source of investment income.
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