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The macro environment has a substantial impact on high-tech companies and, in principle, the companies that benefited from the boom of the Corona period are the ones that will suffer from the economic slowdown. Faber, who made the “bargaining economy” during the Corona period into something common and accessible to small businesses, is being harmed now that the small businesses are going into the bunker.
Oppenheimer who covers the company analyzes the company’s reports and lowers the target price he gives the stock from $55 to $50 while maintaining the “outperform” recommendation.
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“Faber (FVRR) published mixed reports, with a continued slowdown in the rate of revenue growth, to a rate of only 13% (compared to an average growth of 36% in the previous two years), alongside an improvement in EBITDA. A significant slowdown in the rate of growth in view of the weak macro environment among small businesses leads the Faber’s management to focus on profitability and efficiency, with layoffs of 7% of the workforce.
“We anticipate” Kotorev in Oppenheimer “continuing the process of moderating growth and adapting the business model to the new situation, but maintain the Outperform recommendation from pricing considerations, while lowering the target price per share from $55 to $50, based on a multiplier of 4.9 for the 2023 sales forecast, a discount of 26 % to the SHOP share”.
In the second quarter of 2022, Faber presented revenues of $85 million, an annual growth of 13%, a significant slowdown from 27% in the previous quarter and from 43% in the quarter before that, lower than the consensus of $86.7 million and below the company’s forecast range ($86-87 million). The gross profit rate decreased to 82.7%, a quarterly decrease of 80 bps and an annual decrease of 170 bps.
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“In contrast,” Oppenheimer continues, “adjusted EBITDA rose to $4.6 million, above the expectation of $3.5 million, and above the upper limit of the company’s forecast ($3-4 million). Faber generated a positive cash flow from current operations of $7.1 million this quarter dollar and ended the quarter with a cash fund of 638 million dollars (not including customer deposits of 143 million dollars), against debt for convertible bonds in the amount of 451 million dollars.
“The number of Fiber active buyers was 4.2 million, an annual growth of only 6% and no change compared to the previous two quarters (slowing down from an annual growth of 11% in the previous quarter). Transaction volume from the average spend per buyer increased by an annual rate of 15% to $259 (Similar to the growth rate of 16% in the previous quarter), while the average commission rate take rate was maintained at the high level of 29.8%, against the background of an increase in the service commission rate (50 NB) and an increase in subscriber activity and the promotion of Promoted Gigs offers.
Faber’s management expects revenues of $80.5-82.5 million in the next quarter, growth of 10% according to the mid-term and lower than the expectation of $88 million, with EBITDA of $5-6 million, significantly above the consensus of $2.8 million. Faber’s management lowered the The revenue forecast for the entire year 2022, in the range of 332-340 million dollars, a growth of 12%-14%, compared to the previous forecast of 345-365 million dollars, but on the contrary, raised the EBITDA forecast to the range of 19.5-21.5 million dollars, compared to the forecast The previous one of 10-17 million dollars. This is in accordance with the weakness in the activity of small businesses and efficiency measures that the company took in response to the new situation, including the dismissal of 60 employees, approximately 7% of the total workforce.
“We lower our forecasts for Faber’s revenues in 2022 and 2023, along with raising the EBITDA forecasts in accordance with the company’s management forecast, and estimate that the new situation of slowdown in Faber’s target markets requires a stronger emphasis on the issue of profitability. We maintain our recommendation of Outperform based on relative pricing considerations , but lower the target price from $55 to $50, based on a multiple of 4.9 for the 2023 sales forecast, a 26% discount to SHOP’s share pricing.”
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