What Happened:
Shares of online freelance marketplace Fiverr (NYSE:FVRR) jumped 7.6% in the afternoon session as yields fell after the U.S. Treasury Department lowered the borrowing estimate for the first quarter of 2024. According to a press release, the Treasury Department is expected to borrow $760 billion, $55 billion lower than the $815 billion estimate provided in October 2023, due to "projections of higher net fiscal flows and a higher beginning of quarter cash balance."
Stocks have trended higher since late 2023 as market participants anticipated that the Fed would begin to cut rates in 2024, after recent economic data showed that inflation is cooling off. The first policy decision will be announced on January 31, 2024, with the consensus expectation for rates to remain steady at 5.25%-5.5%.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Is now the time to buy Fiverr? Access our full analysis report here, it's free.
What is the market telling us:
Fiverr's shares are very volatile and over the last year have had 41 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 10 days ago, when the company gained 5.8% on the news that Goldman Sachs analyst Eric Sheridan upgraded the stock's rating from Neutral to Buy and assigned a price target of $43. The price target implied a potential 66% upside from where shares traded when the upgrade was announced. Fiverr was the only technology stock that the analyst upgraded in a recent research note. Citing the reason for the upgrade, the analyst added that Fiverr "continues to position its platform and products for increased levels of personalization and matching capabilities, along with more complex projects, with many of those initiatives driven by AI."
Fiverr is up 9.8% since the beginning of the year, but at $28.76 per share it is still trading 38.4% below its 52-week high of $46.71 from February 2023. Investors who bought $1,000 worth of Fiverr's shares at the IPO in June 2019 would now be looking at an investment worth $720.80.
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