Artificial technology (AI) is here to stay. Large language models (LLM) like ChatGPT are already disrupting many industries with AI-generated text, images, and even videos. The next generation of LLMs will be even more powerful, and I probably haven’t even imagined the incoming wave of killer apps yet.
But nobody knows who will make the next big AI move. The big winners in this stock market boom are largely generalists — makers of the computer chips and systems that power today’s AI software. And even the most dazzling market darlings have met some investor skepticism lately. AI chip designer Nvidia (NASDAQ: NVDA) shares are down 16% from their recent highs, and server systems builder Super Micro Computer (NASDAQ: SMCI) took a 63% swan dive in about five months. They could recover and skyrocket again, or maybe they’re still facing further price cuts.
So how do you invest in the exciting AI space without running into a potentially overvalued land mine? In my view, the trick is to start with a fairly priced or even undervalued AI stock. Step two: Make sure it’s a high-quality company with potential to disrupt its chosen industry in the long run. It’s a short checklist, but it also produces a short list of results.
Today, I would recommend approaching the AI space from a very different angle. Have you looked into Fiverr International (NYSE: FVRR) lately? This stock looks ready to make a big splash in 2025.
Fiverr’s business model and revenue streams
Fiverr runs an online marketplace for freelance services. The company makes it easy for freelancers to advertise their services, and for service buyers to get the help they need. In return, Fiverr pockets a small fee for every service-buying transaction. Popular activities include coding, writing, graphic design, and film editing.
It’s a little more complicated than that, but there’s your snapshot of Fiverr’s core business plan.
The company has been around since 2010, but it’s still a small fish in a big pond. The overarching goal is to change how people do business, and that’s a pretty ambitious goal. Management estimates that the domestic market for the types of services you find on Fiverr was worth $247 billion in 2021. But most of those freelance services are sought and found offline, mostly through old-school methods such as personal acquaintances, newspaper ads, or social media posts.
The opportunity to take friction out of that connection process is enormous and Fiverr is just getting started. The company only collected $298 million in 2021 revenue, or about 1.2% of the freelance services market. Top-line revenue has increased by 26% since then, standing at an annual run rate of $376 million today. At the same time, the target market keeps growing, too; Fiverr’s growth potential is still enormous.
Will generative AI help or hurt Fiverr?
So far, Fiverr may not sound like much of an AI stock. In fact, many investors have sworn off buying Fiverr stock because they see generative AI tools such as ChatGPT’s text creation and Midjourney’s digital images as a direct threat to this company. Who needs a freelancer when you can get the help you need from a low-cost generative AI tool, right?
As it turns out, however, those generative AI tools aren’t very helpful without some human guidance. Coming up with the right inputs to generate usable AI-powered content is a bankable skill, and so is the sifting and editing of generated outputs. And Fiverr is happy to connect you with a freelance who can help.
Therefore, generative AI might look like a threat, but Fiverr actually sees it as another potential service-selling channel.
“We are in the early innings of unleashing the full potential of AI in our marketplace, and we believe it will be a multiyear tailwind for us to drive product innovation and growth,” Fiverr CEO Micha Kaufman said in July’s second-quarter earnings call with analysts.
Fiverr’s potential
Fiverr’s stock soared in 2020 as millions of people found themselves stuck at home with lots of time to spare to sell their services digitally. Share prices started to fall as soon as effective COVID-19 vaccines became widely available, and the skeptics haven’t looked back. At this point, Fiverr’s stock trades 92% below the peak prices of early 2021.
However, the business never stopped making sense. I already mentioned Fiverr’s rising revenue, and the growth story continues further down the financial statements. Free cash flows have more than tripled in two years and trailing bottom-line earnings recently turned positive.
The stock probably deserved a price correction in 2021, but the bearish market makers took it too far. Fiverr is a successful and profitable business, seeking to disrupt an enormous target market. Yet its stock trades at just 11 times free cash flow, 2.6 times trailing sales, and 9.1 times forward earnings estimates.
So if you’re looking for a strong AI stock in Wall Street’s bargain bins, I highly recommend taking a closer look at Fiverr. This stock is poised to soar as top-line sales grow and bottom-line profits skyrocket. The bullish business trend is already underway, and I’m just waiting for bearish investors to notice. I predict the stock is going to make big moves next year and I’ll be along for the ride.
Should you invest $1,000 in Fiverr International right now?
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Anders Bylund has positions in Fiverr International and Nvidia. The Motley Fool has positions in and recommends Fiverr International and Nvidia. The Motley Fool has a disclosure policy.
Prediction: This Artificial Intelligence (AI) Stock Is Going to Make Big Moves in 2025. Here’s Why. was originally published by The Motley Fool
