Docebo is still a Buy, says Laurentian Bank

Macro trends are staying favourable for online learning platform Docebo (Docebo Stock Quote, Charts, News, Analysts, Financials TSX:DCBO), according to Nick Agostino, analyst for Laurentian Bank Securities, who reported on the company in a Thursday earnings preview. Agostino reiterated a “Buy” rating, saying Docebo is at the tipping point of profitability.

Toronto-based Docebo, which offers a SaaS-based learning management system to corporations and has a presence in 74 countries worldwide, is set to report third quarter financials on November 10 before market open, with Agostino expecting in-line numbers. Agostino is calling for sales of $36.9 million, representing a 36.4 per cent year-over-year organic growth rate (slower than recent quarters due to an elongation of the company’s Enterprise-level sales cycle), and an EBITDA loss of $185,000, which would put Docebo on the track to profitability by the year’s end, Agostino said. (All figures in US dollars except where noted otherwise.)

“Despite F/X headwinds and retention challenges, macro trends continue to be favourable,” Agostino wrote. “According to MarketsandMarkets, the Learning Management System market is forecasted to grow from $15.8 billion in 2021 to $37.9 billion by 2026 at a CAGR of 19.1 per cent.”

Agostino expects Docebo’s average contract value (ACV) to hit $45,200 in the quarter, up 15.0 per cent year-over-year on growing outbound activity and the addition of new clients, with the company’s customer count ending the Q3 at 3,242.  

Docebo was an early benefactor during the pandemic as the market took a shine to online learning stocks. DCBO went from about C$17 at the start of 2020 to as high as C$117 by September, 2021. But the past year has been a lot of backtracking for the stock, which has now been trading in the high C$30 range for the past four months. 

But Agostino sees better days ahead and has maintained in his report a C$68.00 target price on DCBO, which at the time of publication represented a projected one-year return of 80.0 per cent. The analyst said hitting EBITDA-positive territory by the year’s end would be a potential catalyst for the stock.

On comps, Agostino said, “DCBO currently trades at 4.4x NTM EV/Sales versus peers at 6.2x, including outliers, despite a better growth and profitability profile.”

“We estimate Q3 ending net cash of $194.3 million including CFO usage of $938,000 (excl. w/c), with DCBO remaining well positioned to be opportunistic on M&A to further strengthen its market share,” he said.

For the full 2022 fiscal year, Agostino is expecting Docebo to generate sales and EBITDA of $144.1 million and negative $0.7 million, respectively, moving to 2023 numbers at $195.3 million and $15.6 million, respectively.