Stock markets have had a strong start to 2024, with various companies reflecting that recovery to varying degrees in terms of changes in their share prices.
It’s important to remember here that stock prices alone don’t tell you much about a company other than how investors value it at a given point in time. The stock price may be falling because of poor business performance, but there may be more reasons than that. Similarly, a company with a rising stock price doesn’t automatically lead to a big buy.
You need to see why the stock is moving the way it is, whether the company has a long-term competitive advantage, what its financial position is, and evaluate its overall growth story. there is. Additionally, you want to invest in businesses that you like, that you understand, and that make sense for the composition of your portfolio and the overall goals you have set for yourself.
In this context, let’s take a look at two stocks that the market has been heavily discounting recently, but that could present solid buy propositions for discerning long-term investors.
1. Fiber
fiber (NYSE:FVRR) is down about 40% compared to a year ago. Investors seem to be frustrated with the growth rates the company is reporting, especially related to pandemic-level growth, but there’s a lot more to uncover below the surface.
While it’s true that Fiverr hasn’t grown at the same pace as it did during the pandemic, we expect its growth rate to continue indefinitely when interest in buying and selling gig services has exploded compared to previous periods. It wasn’t always practical to do so.
At the same time, the gig economy remains an increasingly important aspect of the global labor economy and is expanding rapidly. By some estimates, the global gig economy could reach a valuation of around $873 billion by 2027.
Fiverr has also continued to steadily grow its revenue, recently turning a profit under Generally Accepted Accounting Principles (GAAP). Key drivers of this sales growth and profitability include expanding take rates on deals, innovations in the wake of the artificial intelligence (AI) boom, and promoted gigs that allow freelancers to pay to increase their visibility. This includes increased adoption of programs that of their service.
In 2023, Fiverr reported revenue of $361 million, up 7% year over year. Note that the company reported revenues of approximately $190 million in 2020. So this means that in three years he has increased by 90%. Fiverr’s 2023 net income was $3.7 million, and its 2022 net loss was $72 million.
At the end of 2023, Fiverr had 4.1 million active buyers on its platform, which was down 5% year over year. However, spending per buyer at the end of the year totaled $278, a significant 6% increase compared to the same period in 2022. Fiverr also increased its take rate by 160 basis points as of the end of 2023, ending the year with take. The rate is 31.8%. The company’s AI investments increased his gross merchandise value (GMV) on the platform by 4% in 2023.
Fiverr is rolling out a range of new AI-centric services, including everything from skilled freelancers who create custom apps and chatbots for clients to AI matching tools that help connect buyers and freelancers. Management also noted that complex services accounted for his 32% of gross merchandise value last year, up 29% from 2022.
This is not a story about a business in decline. The company’s AI investments, rising take rates, and improving profitability all bode well for the future. Currently, the price-to-sales ratio (P/S) is hovering around 2.3 times, so now may be a good time to buy stocks that are trending.
2. Chewy
chewy (NYSE:Chewy) Over the next 12 months, the stock price fell by about 60%. A lot of that seems to go back to the fact that investors are concerned about the overall pet care industry and what pet spending will do in a still struggling global economy.
While it’s true that pet ownership and spending on pets has skyrocketed during the pandemic, that doesn’t mean the industry has since disappeared. Although spending has been subdued and the pace of individuals purchasing new pets has slowed from pandemic levels, most people consider spending on furry friends an important aspect of household spending.
This provides a degree of resilience for companies exposed to this sector despite ongoing macro challenges. It certainly supports Chewy’s overall financial performance. Also, despite what Chewy’s stock price indicates, the company’s financials are strong, and the company is currently profitable despite a slight decline in its active customer population.
Most of Chewy’s revenue comes from recurring revenue from its Autoship program. In 2023, Autoship sales accounted for 76% of Chewy’s total net sales. So not only are one-time sales a relatively small portion of his Chewy’s revenue, but this also shows that once customers use the platform, they tend to stick with it. Net sales per active customer totaled $555 in 2023, an increase of 12% from 2022.
Last year, 85% of Chewy’s net sales came from non-discretionary pet spending sources such as supplies and health care. Net sales for the year amounted to $11 billion, an increase of 10% over the previous year. Although net income was down from a year ago, the company still reported GAAP profits of approximately $40 million, with adjusted net income totaling $296 million.
Chewy has also proven to be a free cash flow machine. The company’s free cash flow in 2023 will nearly triple from the previous year, up from last year’s figure of more than $340 million. This stock is currently trading at a P/S ratio of less than his 1. If you’re looking for quality companies to buy on a dip, you might want to take another look at this top pet stock.
Should you invest $1,000 in Fiverr International right now?
Before buying Fiverr International stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Things investors can buy right now…and Fiverr International wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month.of stock advisor Since 2002, the service has more than tripled S&P 500 returns*.
See 10 stocks
*Stock Advisor will return as of April 4, 2024
Rachel Warren has no position in any stocks mentioned. The Motley Fool has a position in and recommends Chewy and Fiverr International. The Motley Fool has a disclosure policy.
2024 Bull Market: 2 Plunging Growth Stocks to Buy on the Dip, Down 40% and 60% was originally published by The Motley Fool.
