Risks are Increasing for AI Stocks: Does That Make Fiverr Stock a Buy?
Summary
Parkev examines the impact of artificial intelligence on Fiverr, noting that the threat is no longer theoretical but is actively hurting the company's financials. Revenue decreased by 10% year-over-year in the most recent quarter, with marketplace revenue falling by 15.5%. Parkev highlights that management is currently restructuring the business, though this turnaround is expected to take at least six quarters to show results.
Despite the headwinds, Parkev observes some financial strengths, such as an improved operating profit margin of 4.2% and a return on invested capital of 5%. The stock is currently trading at a forward P/E of 7, which is near its historical low. Parkev has revised the discounted cash flow model significantly lower, predicting free cash flow will drop from $92 million in 2025 to just $30 million by 2027.
Mentioned Stocks
Reasoning: Parkev calculates an intrinsic value of $12.40 based on a revised DCF model, which is higher than the current market price of $9.28. While Parkev acknowledges the 10% revenue decline and the existential threat from AI, Parkev believes the current valuation (forward P/E of 7) still offers an upside. Parkev has lowered the conviction to low and expects free cash flow to drop to $30 million by 2027, but continues to see value at the current price level.