Today’s pick is about a beaten-down stock that’s down over 10% year to date…
Appears to be facing several macroeconomic headwinds…
And has actually been negatively affected by the generative AI boom.
And yet, the average Wall Street analyst price target for this stock is over 60% higher than its current price…
With even the low end of the analyst price target implying a nearly 30% upside.
When you have the market price of a stock so wildly off from analyst price targets, you know there’s an opportunity there.
The only caveat is you have to be willing to hold the position long enough to realize this opportunity.
This is not a “quick hit” opportunity, but one that requires some staying power.
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Fiverr International Ltd. (FVRR)
Freelancing platform Fiverr saw its stock take a BIG hit in early May – with its stock shedding nearly 30% of its value in just three days.
The reason for this plunge was first-quarter results that showed drastically slowing growth – despite shrinking losses and surging free cash flow. Combine that with the maximum hype around generative AI and its potential to make a lot of the freelance services offered on the platform obsolete, and you have a recipe for a drastic fall.
Since then, the stock has largely traded sideways and is now trading at roughly what it was in May 2023 – just below $26.
So why do Wall Street analysts have a median price target of $40, an average price target of $41.36, and a low-end price target of $33?
For one, its second quarter results were much stronger – delivering an upward surprise in earnings.
Second, the negative impact of generative AI appears to have been drastically overstated, with the platform now filling up with jobs requesting AI-related skills. The platform’s long-term value proposition remains unchanged.
And third the valuation is highly attractive, at about a 12x forward P/E ratio.
In sum, if you have holding power, Fiverr could reward you nicely.
To your wealth,
Felix @ Ace of Investing