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Why the Freelancer Ltd share price has been slammed today

The Freelancer Ltd (ASX: FLN) share price has been crushed today, falling more than 17% on the back of a disappointing half-year result (released after the market’s close on Monday). The shares are trading at 54 cents, but did trade as low as 52 cents, down from a 52-week high of $1.76.

Freelancer offers a freelancing and crowd-sourcing marketplace, connecting employers with freelancers globally from nearly 250 countries, regions and territories. Basically, users can go to the platform to hire freelancers to complete work in various areas including software development, writing and data entry, to name a few.

While the market has certainly expressed its excitement around the concept, and the growth achieved to date, yesterday’s earnings update left a lot to be desired.

Revenue for the group remained flat, compared to the prior corresponding period. While revenue from the online marketplace division grew 6% to $23.1 million, revenue from online payment services (part of its Escrow.com acquisition) declined nearly 28% to $3.1 million.

Meanwhile, gross payment volume (GPV) grew a mere 1% on the Freelancer platform, but declined 24% for Escrow.com, combining for an 18% dip in GPV for the group as a whole. The company did note that GPV experienced a strong recovery during the second quarter compared to the first quarter, but that appears to have come as little consolation for investors.

Freelancer’s gross profit declined by 1%, with a slightly lower gross margin, and operating cash flows diminished by 66% to just $1.5 million.

Investors have every right to be disappointed with Freelancer’s progress. Although some will see today’s heavy share price decline as an opportunity to buy, I would at least be inclined to wait to see whether the company can improve its performance.

Another company that is struggling today following an earnings guidance downgrade is iSentia Group Ltd (ASX: ISD), whose share price has fallen 16.7% at the time of writing.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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