Fiverr International Ltd. (FVRR) fell 4% during Tuesday's session after MKM Partners downgraded the stock from Neutral to Sell but raised its price target from $145.00 to $185.00 per share—a 21.5% discount to Monday's closing price.
- Fiverr shares moved lower after MKM Partners downgraded the stock to Sell, although the firm raised its price target to $185 per share.
- Analyst Rohit Kulkarni believes that Fiverr's fundamentals have improved throughout the pandemic but that the stock's valuation has become "feverish."
- Technical indicators suggest that the stock could see additional downside if it breaks down from lower trendline support.
MKM Partners analyst Rohit Kulkarni noted that Fiverr stock is trading at 36 times expected FY21 revenue, which is above the historical peak of any other internet marketplace in recent times and exceeds that of Zoom Video Communications, Inc. (ZM) and other pandemic plays. While fundamentals are "significantly stronger," the analyst believes that valuation levels have become "feverish."
The move comes shortly after UBS downgraded Fiverr stock to Sell on Jan. 19, saying that the risk/reward is skewed to the downside when measuring valuation against implied growth. While the analyst sees secular growth themes, there could be tough comps in 2021 alongside a premium valuation relative to its peers.
From a technical standpoint, the stock moved toward trendline support at about $222.00 during Tuesday's session. The relative strength index (RSI) continues to trade at neutral levels of 49.59, but the moving average convergence divergence (MACD) experienced a bearish crossover, suggesting that there is room for more downside ahead.
Traders should watch for a rebound from trendline support at around $222.00 toward upper trendline resistance at around $250.00. If the stock breaks out from those levels, traders could see a move toward prior highs of around $185.00. If the stock breaks down from trendline support, traders could see a move toward Fibonacci support levels of $188.71.
Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. They are based on Fibonacci numbers. Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used.
The Bottom Line
Fiverr shares moved lower after MKM Partners downgraded the stock to Sell, although the firm raised its price target to $185 per share. While analyst Rohit Kulkarni believes that the company's fundamentals are improving, valuation levels have become "feverish." Technical indicators point to more potential downside if the stock breaks down from support.
The author holds no position in the stock(s) mentioned except through passively managed index funds.