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Thinkific Labs has a 92 per cent upside, says National Bank

THNC stock

Canadian online learning platform Thinkific Labs (Thinkific Labs Stock Quote, Charts, News, Analysts, Financials TSX:THNC) has had a nice upswing since about mid-December, returning about 45 per cent over that period. And while the stock still has a lot of ground to cover before returning to highs set in 2021, there’s likely some good upside from current levels, according to analyst Richard Tse of National Bank Financial.

Tse reviewed the latest quarterly numbers from Thinkific in a client update on Thursday where he reasserted an “Outperform” rating and C$4.00 target price, good for a projected 12-month return of 92.3 per cent at the time of publication.

Vancouver-based Thinkific, whose cloud-based software allows entrepreneurs and businesses to create, market and sell online courses, announced its full-year and fourth quarter 2022 financials on Thursday, showing Q4 revenue up 28 per cent year-over-year to $13.8 million and a net loss of $3.7 million compared to a loss of $9.4 million a year earlier. (All figures in US dollars except where noted otherwise.)

Adjusted EBITDA was up 50 per cent year-over-year to a loss of $4.4 million. In January, the company had provided Q4 guidance, with revenue expected at $13.5-$13.7 million and adjusted EBITDA at negative $5.1-negative $5.7 million.

“To continue to drive growth, as well as achieve profitability, we have taken decisive action in the past year to align our organizational structure with a focus on the highest return investments, and operational efficiency,” said Thinkific co-founder and CEO Greg Smith in a press release. “I am confident that the team will deliver on our business objectives and achieve profitability.”

Looking at the numbers, Tse said they were relatively in-line with management’s guidance from January, while adjusted EBITDA at negative $4.4 million was above his and the Street’s estimates at negative $5.7 million and negative $5.5 million, respectively.

Tse noted that the year-over-year increase in quarterly revenue was driven by a rise in average revenue per user (ARPU), which was up 21 per cent year-over-year and up four per cent sequentially to $138, with increasing adoption by users of Thinkific Payments as well as customer upgrades and new Thinkific Plus customers all factoring into the mix. At the same time, Thinkific was able to grow its customer base by four per cent year-over-year.

The efforts look especially good, Tse said, considering the macro environment where other subscription-based businesses are seeing elevated churn.

“Looking ahead, management noted the main driver of growth going forward is expected to come from expanding wallet share with existing customers; that said, a Q/Q increase in Paying Customers suggests continued growth in the Company’s creator base,” Tse wrote.

“We believe Thinkific is an early leader in the online learning market with a competitive platform that offers numerous features for content creators. With incremental growth drivers such as Thinkific Payments and Thinkific App Store, we see a notable runway of growth from ARPU expansion for existing customers and new creators,” he said.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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