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Thinkific Labs is a triple from here, says ATB

ATB Capital Markets analyst Martin Toner is staying bullish on Thinkific Labs (Thinkific Labs Stock Quote, Charts, News, Analysts, Financials TSX:THNC) in a recent update to clients. Toner says the secular shift in learning platforms towards online engagement will keep Thinkific in growth mode in the post-COVID  period.

Thinkific Labs, which offers a platform for entrepreneurs and businesses to create, market and sell online courses, is making another cut to its workforce, in aid of reducing costs. The restructuring, announced on January 10, will see THNC shed 75 people or about 20 per cent of its total work force, and it comes after March 2022’s move to lay off 100 people, representing at the time 20 per cent of its work force.

“We are grateful to our team for creating our exceptional culture, industry-leading products, and for working to ensure the success of our Creators,” said co-founder and CEO Greg Smith in a press release. “Creator success remains our north star, and we will continue to focus our efforts on building the most innovative products, features and tools that make it easy for our customers to build and scale amazing digital learning businesses.”

Toner said the headcount drop comes after flat customer growth over the past two quarters from Vancouver-based Thinkific.

“Macro headwinds continue to pose a challenge for the Company, and our estimates are for modest revenue growth in 2023 and 2024 with re-acceleration in 2025. We believe that Thinkific will fix the go-to-market approach and benefit from growth in the Creator economy in a post-pandemic environment,” Toner wrote in his January 12 report.

Toner maintained an “Outperform” rating on the stock and one-year target price of C$6.50 per share, which at the time of publication of Toner’s report represented a projected one-year return of 209.5 per cent.

“In light of the restructuring announcement, we have revised our estimates, and we believe the Company will report lower losses over the next quarters,” Toner wrote.

Ahead of 2022 fourth quarter numbers from THNC due next month, Toner is projecting Q4 revenue at $13.7 million compared to $13.3 million realized for the third quarter. For the full 2022 year, that puts the company at $51.3 million compared to $38.1 million in 2021. (All figures in US dollars except where noted otherwise.)

For 2023, Toner is estimating $57.2 million in revenue and negative $5.1 million in adjusted EBITDA, moving to 2024 revenue of $66.7 million and EBITDA at positive $0.3 million.

Toner said the global demand for online content should remain strong long-term, driver by a shift to the ‘creator economy,’ which will support growth for THNC.

“Thinkific is lapping difficult comparables following a period of rapid acceleration and adoption of online content consumption during the pandemic. In the near term, we believe growth rates will remain depressed as the world emerges from the COVID-19 pandemic but still positive,” Toner said.

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