Docebo is undervalued, says National Bank Financial

Learning management system vendor Docebo (Docebo Stock Quote, Chart, News TSX:DCBO) has a fan in National Bank Financial analyst Richard Tse.

In a research report to clients this morning, Tse initiated coverage of Docebo with an “Outperform” rating and a one-year price target of $20.00, which implied a return of 23 per cent at the time of publication.

The analyst explained where DCBO fits the educational tech space.

“Docebo is a Learning Management System vendor. A Learning Management System (LMS) is widely considered to be a software application for the administration, documentation, tracking, reporting and delivery of educational courses and training programs (Wikipedia),” he wrote. “The fundamental objective of LMS is to enable training and education remotely (distance education) in different formats (largely multimedia teaching). It’s widely believed the first full-featured LMS was created in 1991, shortly after the rise of the global internet in the late 1980s. Today, LMS applications are adopted by institutions across nearly all sectors.”

Tse said Docebo has a differentiated solution.

“Docebo’s technical edge comes from its Artificial Intelligence (AI) and Social Learning capabilities as it relates to customizing and optimizing content,” he explained. “Hosted on Amazon AWS, Docebo could also be considered a platform. The Company targets primarily SMBs (small and medium-sized businesses) but scales to large enterprises. With more than eight million registered learners in over 1,600 enterprises across 68 countries, Docebo is available in more than 40 languages. In addition to providing a learning platform for employees, Docebo is also a prominent platform used for external enterprise training (think customers and partners) which accounts for 50% of its user base. Established in 2005, Docebo has $37 million in trailing 12 months revenue with five offices in Europe, Asia and North America and 300 employees.

Tse thinks Docebo will post an Adjusted EBITDA loss of $6.13-million on revenue of $40.4-million in fiscal 2019. He expects those numbers will improve to an EBITDA loss of $4.85-million on a topline of $56.6-million the following year.

So why does Tse think Docebo will continue to grow in what is clearly a competitive market? The analyst said this is a huge market with a lot market share potential, and noted that the company is a disruptor that has superior sales and marketing efficiency.

“As noted, this is a fiercely competitive sector. Given that, one might ask how Docebo is better? From our research, we think it’s because the Company pursues the front of the innovation curve –particularly in AI and Social. Beyond that, we think Docebo has one of the industry’s most efficient sales and marketing models to the point that we’ve heard many competitors envy the Docebo sales and marketing model,” he added.

The analyst said DCBO’s tech puts it in rare company.

A key differentiating factor for LMS providers is the added features beyond the base platform -this is where we saw significant variations,” Tse said. “We note Docebo was one of the few players with an AI-enabled LMS. In fact, it was only one of a few vendors with AI capability – the other notable one being Cornerstone, a player that’s considered the leader in the market. If that wasn’t enough, we believe Docebo’s AI capability is native, which offers the Company a cost advantage and technology control.”