Issue #29: A market leader in a booming fintech niche and riding the work-from-home wave

Larry Fink is CEO of BlackRock, the largest money management firm in the world. He co-founded the firm in 1988 and has been among its leaders since.

In January 2020 Fink took an unusual step. He changed the focus of his firm to ESG (Environmental, Social, and Governance) investing.

His explanation was simple: “sustainability and climate-integrated portfolios can provide better risk-adjusted returns to investors”.

Skeptics expected that idea to fail, but in Q2 2021, 1.5 years later, BlackRock announced that assets under management had grown from $7.32 trillion to a record $9.49 trillion in the previous year, a gain of almost 30%.

The lesson: even the most successful investors look for new ideas and don’t hesitate to embrace opportunity. That’s how they stay on top.  

Let's get into this week’s report. Today we’re looking at two fast-growing companies in booming tech sectors:

  • A leading fintech firm providing point-of-sale financing services.
  • A turnaround play in the freelance marketplace business.

Affirm Holdings Inc. ($AFRM)

$67.17 – Share price at the time of writing



  • Affirm is a major player in the booming “point of sale financing” or “buy now pay later” niche.
  • Affirm lets online shoppers choose an installment plan at checkout.
  • The point of sale financing market exploded during the pandemic and is expected to keep growing fast.
  • Competitor Afterpay was recently acquired by Square, and there is speculation that Affirm may be an acquisition target.

What they do:

Affirm operates a point-of-sale payment solution for consumers. Its payment network allows consumers to pay for purchases with an installment plan.

Affirm pays the merchant the full amount up front. They charge an APR of 10 to 30 percent, depending on the plan and on the buyer’s credit. The Affirm app makes it easy for buyers to keep track of payments and sends reminders.

Affirm also receives a fee from merchants. Online sellers have found that point-of-sale-financing increases sales volume and reduces cart abandonment, so they are willing to pay for the service.

There were over 12,000 active merchants using the Affirm platform in March 2021, more than double the number in the same quarter of 2020. Active consumers grew 60% to 5.4 million in the same period. Gross merchandise volume grew 83% to $2.3 billion.

Affirm has an exclusive relationship with Shopify ($SHOP), and provides point-of-sale financing to Shopify merchants.

Shopify is a leading competitor to Amazon. They are growing at a wild rate: gross merchandise volume was up 119% in the last reported quarter and the number of merchants with Shopify stores has been rising at 126% a year. Shopify now powers over 1.7 million businesses in more than 175 countries.

Affirm’s relationship with Shopify allows them to offer their services to an enormous and rapidly growing customer base.

Why they’re spiking in interest:

Reddit mentions of $AFRM in the last 8 days leaped 875% from the previous 8-day period.

The surge was kicked off by the August 3 news that Affirm will work with Apple ($AAPL) to provide installment plans for Apple device purchasers in Canada.

That announcement was followed on August 5 with news that Square ($SQ) is acquiring Australian buy-now-pay-later provider Afterpay for $29 billion. Affirm shares gained 18% on the combined news.

The Square/Afterpay combination will provide competition for Affirm, but it also brought attention to the sector.

There has been speculation that another major player seeking to move into the buy-now-pay-later space will acquire Affirm rather than develop their own system.

Shopify (which already owns 7.6% of Affirm), PayPal, and even card giants like Visa and Mastercard have been suggested as potentially interested in acquiring Affirm.

Notable comments from Reddit:

“I’m long on $AFRM. The financial sector are dinosaurs through and through. If you’ve ever applied for (and received) a mortgage, it’s a nightmare. It requires little imagination on my part for Affirm or “Green Sky” to open up to home and auto loans.”

– PinBot1138

“People should probably get AFRM for when it gets acquired for a free 30%.”
– Lukebreit

Signal: Over 77% of the $AFRM float is held by institutions. Scottish investment management firm Baillie Gifford is the largest institutional holder, with over $75 million worth of shares.

Why $AFRM could be valuable:

The buy-now-pay-later has enormous upward momentum. Sales have increased dramatically and the increase is expected to continue.

Source: Mercator Advisory Group via Payments Journal

McKinsey & Company’s annual POS Financing Survey found that about 60% of consumers are likely to use point-of-sale financing over the next six to 12 months.

Affirm founder and CEO Max Levchin has a record of developing successful and innovative payment systems: he’s one of the founders of PayPal.

Affirm does not charge late payment fees and has a fixed monthly payment system. This feature is attractive to users who are concerned with the complexities of credit card billing and payment.

Affirm’s Net Promoter Score – a measure of customer loyalty – places the company at 78, above Amazon and just below Apple. 64% of transactions are from repeat users, and repeat customers spend an average of $2,200 per year. Delinquency rates were just over 1% in 2020.

Six of 10 analysts covering the stock rate it “Buy”, with the other 4 placing it at “Hold”. The consensus price target is $76.71, 14% above the current level.

Rapid user growth, high customer retention, and a rapidly expanding market add up to very strong growth prospects for $AFRM.

The stock has dropped to under 50% of its post-IPO surge of $140 per share and has settled into a steady band in the $60-$70 range.

Post-IPO hype often drives new listings to unrealistic valuations. When they drop back to a more realistic level many retail investors become frustrated and drop out. That leaves a core of institutional holders and a strong base for appreciation on positive news.

What the risks are:

Affirm is not profitable and is not expected to achieve profitability soon. The Company also has a high debt/equity ratio of 87.95%. The Company has adequate working capital but the combination of debt and losses is still a concern.

Affirm operates in a highly competitive market. Right now that market is dominated by relatively new companies like Afterpay, and Klarna. The sector’s rapid growth could attract competition from larger companies with greater financial capacity than Affirm.

Affirm faces credit risk. Default rates have been extremely low, but unexpected events could drive them high enough to affect the Company’s results.

Affirm is exposed to a potential economic downturn. A recession could reduce the discretionary purchases that drive much of the Company’s gross merchandise volume and increase default rates.

The buy-now-pay-later sector could attract increased government regulation, which could affect the Company's results and stock price.

Bottom line: Affirm’s lack of profitability makes it a speculative play. But its rapid revenue growth and established position in an exploding market make it an interesting speculative play. There is strong potential for acquisition and for medium to long-term growth. Watch for the release of Q4 and full FY 2021 results, scheduled for Sept. 9.

Fiverr International Ltd. ($FVRR)

$168.52 – Share price at the time of writing



  • Fiverr International operates a global online marketplace for freelance workers. The platform links service sellers with service buyers and charges commissions on payments.
  • Fiverr also offers back-office service and training products for freelancers and a subscription-based content marketing platform for businesses.
  • The Company has seen steady growth in users and revenue, and analysts expect it to achieve profitability in 2023.
  • $FVRR shares took a one-day dive of 24% on August 5, after the company announced an expected decrease in revenue for the 3rd quarter.

What they do:

Fiverr is a global freelance employment marketplace for businesses and freelancers. The platform includes roughly 500 categories in eight verticals, including writing and translation, graphic design, video and animation, programming, and music and audio.

The Company operates on a Service-as-a-Product model. Buyers pay 5.5% of the purchase price to Fiverr as commission, with an additional $2 fee for purchases under $50. Fiverr then pays 80% of the transaction value to the service provider, retaining 20%.

Fiverr has revenue-generating products that support its marketplace business:

  • Learn is an e-learning program offering proprietary courses to help freelancers upgrade their skills.
  • AND.CO offers freelance business management software on a subscription basis.
  • Promoted Gigs allows sellers to promote themselves on Fiverr for an additional fee.
  • ClearVoice is a subscription-based content marketing platform for mid-to-large sized businesses.

95% of Fiverr’s revenues come from the core freelance marketplace business.

Fiverr has 4 million active service buyers, up from 2.8 million last year, an increase of 43%. Per-buyer spending is $226, up from $184 a year ago, an increase of 23%.

Fiverr has service buyers in 160 different countries. US buyers represent 53.14% of annual revenue. The UK, Canada, Australia, and New Zealand (combined) account for another 16.86%.

Why they're spiking in interest:

In the last week, Reddit mentions of $FVRR leaped 1600% over the previous week, according to data from

That attention came from the Q2 2021 quarterly report, released on August 5, and the market reaction to that report.

The report showed exceptional trailing results, including a 60% increase in revenue over the equivalent quarter last year.

Active buyers and per-buyer spend also increased, and the critical “take rate” (the percentage of total merchandise volume that becomes Fiverr revenue) rose from 28% to 27.8%.

Those positive results were overshadowed by the guidance that the Company issued for the rest of the year. Management expects revenues of $68 to $72 million in Q3, down from $75.3 million in Q2.

That guidance drove a massive selloff. Fiverr shares fell by 24% on the day the report was released. Social media chatter escalated on the selloff.

Notable comments from Reddit:

“Doubling down on FVRR calls. Massively oversold on better than expected revenue and earnings.”
– epacella13

“I bought Fiverr because it really is a fast, easy to use popular and practical platform. -25% in one day is oversold af.”


Signal: Jim Simons of Renaissance Technologies and David Tepper of Citadel hold a combined $46.2 million in $FVRR stock.

Why $FVRR could be valuable:

Orbis Research projects that the global freelance platform market will grow at a CAGR of 15.3% through 2026.

Fiverr believes that its total addressable market is $115 billion and that the majority of freelancing happens offline, offering dramatic growth potential.

Fiverr has shown consistent and dramatic growth across multiple key metrics: revenue, total merchandise volume, take rate, sellers, and per-seller spending. Its gross margin is an extraordinary 83.4%.

Analyst sentiment is strong, with 6 of 9 analysts covering the stock rating it a “Buy” or “Strong Buy”. The consensus price target is $258.88, 53.6% above today’s level. Analysts anticipate continued revenue growth with the Company reaching profitability in 2023.

Source: Yahoo Finance

The dramatic drop in the $FVRR stock price that accompanied the release of the latest quarterly report is a reaction to the new revenue guidance, which anticipates a drop in revenue in Q3 2021. $FVRR trades at 24x TTM sales, a very high multiple that can only be justified by constant growth.

The expected drop in revenue is not caused by problems in the company. It’s driven by the relaxation of pandemic-driven restrictions.

As people return to conventional jobs and enjoy more freedom to move, they spend less time freelancing online. That does not affect the overall trend toward remote and freelance work.

The pandemic accelerated the growth rates of freelance platforms. The end of the pandemic is returning those growth rates to a more normal curve. This does not indicate a long-term growth slowdown. It’s simply a return to equilibrium after a major disturbance.

If the company’s performance and the growth of the freelance platform market return to their long-term trend, the investor reaction to this transient movement could be a buying opportunity.

What the risks are:
Fiverr operates in a highly competitive marketplace. Companies like UpWork,, Peopleperhour,, TaskRabbit, and many others offer essentially the same services.

Fiverr also faces competition from smaller platforms focused on a single freelance niche. The Company will have to be aggressive, innovative, and agile to maintain its market share.

Fiverr is not currently profitable and trades at a high price relative to sales. The Company will have to maintain a high growth rate to support its valuation.

Fiverr carries a significant amount of debt. The Company’s cash position remains strong and the debt is not an immediate problem, but the lack of profit combined with the debt level is a concern.

Fiverr’s stock price has been extremely volatile and can react quickly to either positive or negative news.

Bottom line: Fiverr is a rapidly growing company in a rapidly growing market. The stock price was recently punished for an expected drop in revenue caused by recovery from the pandemic. If $FVRR can resume its growth trajectory that 24% drop could be a buying opportunity.

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