The Way Of Amazon

The Way Of Amazon

It is important to remember that the Canadian e-commerce market is so fragmented and these different markets are so fragmented, that Amazon, at best, will be a channel for an oligopoly of e-commerce players.

So we will remain under-appreciated by traditional investors when compared to our American competitors who will finally have the tools to efficiently compete with Amazon. For investors looking for value, the A-Team has been scaling the company consistently for the past five years and are set up to take full advantage of Amazon's competitive advantages and platform, and have a proven track record of creating superior returns.

The "Fantasy Playbook for Investors" is a hybrid of market neutral strategies, and contains four core strategy and positions that I believe to be great places to invest going forward, all offered with attractive cash flow yields.

The world is moving more and more to online shopping and that trend is accelerating, with Amazon leading the way. Fiverr has carved out a nice niche for itself in an exceptionally fragmented market, and has enjoyed consistent growth and profitability, and it is set up to take advantage of Amazon's growing dominance in the marketplace and its own unique competitive advantages, in the areas of marketing, technology, and scalable operations. I am long the company, and recommend that all investors interested in the market should have a short position on the shares of Amazon.

A significant portion of Fiverr's customer base are freelancers, or independent contractors, and that portion will continue to grow, but so too will the portion of customers that are hired by those freelance contractors. As Amazon continues to steal market share, it will drive demand for greater customer experiences and greater quantity and higher quality of customer service.

Despite the growth in online shopping, there are still many opportunities for businesses to increase their bottom line by increasing their customer experience and building a brand, and that is exactly what Fiverr is doing. Fiverr provides an easy way for small businesses to offer customer experience, and helps them compete with Amazon by providing a "free" marketplace on which to do it. Amazon has no problem driving customers to its website, it has to (for their e-commerce business) because they have a huge advantage by virtue of having more volume and more brand name recognition. Fiverr, by contrast, has much smaller volume, and is appealing to a far wider array of customers, many of whom will never be Amazon customers, and have no problem paying for the convenience of being able to buy an accessory or change their address in seconds.

The bottom line is that Fiverr has a long runway for growth and will be a meaningful player in the online marketplace, and as the company continues to gain scale, we should see EBITDA margins expand as the company applies its scale advantage to reduce cost.The company is targeting significant top line growth as it expands internationally, and I expect that we will begin to see revenue growth turn positive this year and accelerate into 2018.

Fiverr is not a highly profitable business, but it is not necessary, and, in the long term, it is a solid long-term cash flow generating business. I expect that the company will be profitable in 2017 and will continue to grow into 2018, but I also believe that Fiverr's focus on building a large, global network and becoming the e-commerce version of an airline seat reseller will translate into high growth for the company over the next 5 to 10 years, and that is why I am currently long the shares.

Concluding Thoughts

As investors we often find ourselves in situations where the price of a stock is above its intrinsic value, but there are still opportunities to invest below its current price level and at attractive prices.