Shares of freelance marketplace Fiverr International (FVRR 5.26%) jumped higher on Friday after getting a vote of confidence from a prominent analyst. As of noon ET, Fiverr stock is up only about 5%, but it was up almost 11% earlier in the day.
Is Fiverr worth the risk here?
Goldman Sachs analyst Eric Sheridan upgraded his outlook for Fiverr stock today, according to StreetInsider. The analyst believes the stock is a buy, and he gave it a price target of $43 per share, which represents approximately 66% upside from where it trades as of this writing.
Fiverr stock is down 22% over the last year because investors are worried about the potential harm to the business from generative artificial intelligence (AI). The thought is that people will need fewer services from Fiverr’s sellers because generative AI apps can do the work instead.
Sheridan admits this risk. However, the analyst believes that Fiverr is still doing a lot of good things and that its shares are now cheap enough to be worth the risk, according to Investing.com. This is why he upgraded Fiverr stock today and excited the market.
Is Fiverr stock a good deal?
Fiverr stock trades at a price-to-sales ratio of less than 3. It’s never a good idea to evaluate a stock entirely on one valuation metric. But for the sake of brevity, that is a low price, as Sheridan points out.
For 2023, Fiverr expects to report revenue growth of 6% to 8%, which is pretty slow. But it shows that the company has held on to the business that it gained during the pandemic, which is also encouraging.
The big unknown is whether Fiverr can withstand the competitive pressure of generative AI and find renewed growth in 2024. If the company can grow faster and keep expenses under control, then this indeed could be a market-beating investment right now.
Jon Quast has positions in Fiverr International. The Motley Fool has positions in and recommends Fiverr International and Goldman Sachs Group. The Motley Fool has a disclosure policy.
