Think Research scores a target raise from Echelon

A big contract win is just what the doctor ordered for Think Research (Think Research Corp  Stock Quote, Charts, News, Analysts, Financials TSXV:THNK), according to Echelon Capital Markets analyst Rob Goff, who increased his price target on the stock in a Wednesday report to clients.

Digital health software company Think Research announced on Tuesday a five-year SaaS agreement worth about $40 million on the total contract value. The company will employ its Digital Front Door (DFD) patient engagement platform and learning management system solutions to address urgent patient access challenges.

“With a broad range of digital modules on our platform, we are focused on getting essential solutions deployed quickly to meet the urgency of the situation. We believe that this deployment will help set the standard for using digital health solutions to improve patient outcomes and save lives,” said CEO Sachin Aggarwal in a press release.

Goff called the deal a landmark win for Think and said while the company has not revealed who the new customer might be, he said the company’s prior Ontario-wide DFD win in November 2021 (for $5.2 million over five years) along with further success in ensuing years likely helped pave the way for the new contract.

“This is a landmark win for Think Research and one that arguably validates much of the Company’s efforts over the past two-plus years as a publicly listed company,” Goff wrote.

“During this time, it’s been a challenging ride for Think with recurring COVID-19 restrictions, drug manufacturing constraints and macro uncertainties helping to lead a steep share price decline that paralleled the broader small cap tech landscape. However, through this dark cloud, Think has quietly won several province-wide contracts in Ontario and increased its exposure to sticky, recurring/reoccurring revenues (85 per cent+), while exercising disciplined cost reductions moving the Company toward EBITDA-positive operations (anticipated for Q422 results and beyond),” he said.

Goff raised his 2023 and 2024 forecasts for Think, bringing his 2023 revenue, gross profit and EBITDA estimates to $92.1 million, $46.9 million and $6.9 million, respectively, and his 2024 numbers to $103.1 million, $53.7 million and $9.7 million, respectively.

“We believe the building blocks for this marquee contract have been laid incrementally over the past 24+ months while the Company is now beginning to realize considerable revenue synergies across its various specialized capabilities,” Goff said.

With the update, Goff reiterated a “Speculative Buy” rating on THNK while raising his target from $0.90 to $1.10 per share, representing at press time a projected one-year return of 100.0 per cent.