Artificial intelligence (AI) is all the rage these days, and no company has benefited from the new big thing on Wall Street more than Nvidia. The chipmaker’s shares are up by nearly 200% this year. However, there are other, less high-profile companies investors can consider that will also profit from the increased demand for AI-related services. One of them is Fiverr (FVRR -1.75%), a corporation involved in the increasingly booming gig economy.
Following encouraging third-quarter results, Fiverr’s shares recently soared by as much as 30% in one day. A single strong quarter might not mean much in the grand scheme of things, but let’s find out why it’s worth holding the company’s shares through the next decade.
Fiverr’s moves in AI
Fiverr’s platform is a freelancing hub. Companies (or sometimes individuals) come to it to find people who can complete projects across a wide range of specialties. One of the advantages of relying on freelancers is that it is cheaper and easier to get them on board, be it for a single project or recurring work. Fiverr simplifies the task further: Freelancers on its platform have portfolios, ratings, and reviews.
Since AI rose in prominence, businesses have realized how valuable various applications of the technology can be to their operations. However, many don’t have the resources to hire full-time employees specializing in AI. That’s where Fiverr comes in. It helps smaller companies match with AI-related experts on its platform. That’s not all. Fiverr has also launched several AI-based tools to help its customers, including Dynamic Matching, which helps businesses with complex job requirements match with the right candidates.
Fiverr has several other AI tools in the works that the company says will help boost productivity and efficiency on its platform.
Profitable growth matters
AI provides plenty of growth opportunities to Fiverr, but the company has also sought to cut costs and become more efficient in the past couple of years. Fiverr’s efforts have paid off. The business is profitable, and has been for a few periods. The third quarter was no different. Fiverr’s revenue increased by almost 8% year over year to $99.6 million. Note that Fiverr’s top line moved in the right direction, despite its number of active buyers decreasing by 9% compared to the year-ago period.
However, Fiverr’s remaining buyers spent, on average, 9% more per order, a metric it calls “spend per buyer.” Fiverr’s GAAP net earnings per share declined to $0.04 from the $0.07 EPS reported in the year-ago period. The company’s adjusted EPS was up by 16% year over year to $0.64. The era of growth at all costs is over. Investors are increasingly seeking companies that can show financial discipline along with strong growth prospects. Fiverr is making progress in that regard.
The long-term view
Fiverr’s work in AI is just getting started. Meanwhile, the company remains a key player in the gig economy, which, despite being down from the highs it reached in the early days of the pandemic, still has attractive long-term prospects. The perks of relying on freelancers are clear for businesses, but why would people choose to forego the legal benefits that come with being an employee to work on a freelance basis? In a word, flexibility.
Gig work allows those who partake in it to spend more time at home with their families, avoid the stressful commute to a 9-to-5 job, be their own bosses, and, in some cases, travel the world while working remotely. No wonder, then, that the gig economy is projected to continue growing. Fiverr’s AI-powered tools and the demand for AI-related work on its platform should be powerful long-term tailwinds. There will be others.
Fiverr’s acquisition of dropshipping specialist AutoDS grants it access to another fast-growing industry. So, despite the company’s shares experiencing a post-earnings jump, Fiverr’s shares are still worth investing in.
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fiverr International and Nvidia. The Motley Fool has a disclosure policy.
