D2L keeps “Buy” rating at Eight Capital

Following second quarter results, Eight Capital analyst Christian Sgro has maintained his “Buy” rating on D2L (D2L Stock Quote, Chart, News, Analysts, Financials TSX:DTOL).

On September 6, D2L reported its Q2, 2024 results. The company posted an Adjusted EBITDA loss of $500,000 on revenue of $44.5-million a topline that was up eight per cent from the same period last year.

“Our second-quarter results were highlighted by strong growth in subscription revenue, annual recurring revenue, free cash flow and gross profit margins, as our team continues to execute well on our balanced growth plan,” CEO John Baker said. “We are winning important new customers in all our markets, most notably in higher education, where we are helping more and more institutions digitally transform and build better learning experiences. At the same time, our current customers continue to grow with D2L as we enhance and expand our learning platform to solve their key challenges, from engagement with students for better progression, to getting students ready for the future, and upskilling the workforce.”

Sgro summed up the quarter.

“D2L reiterated its full-year guidance with the July report,” the analyst wrote. “FQ2 profitability came in behind the Street with the operationally active July quarter (conference and M&A), but more important to us is the growth and demand trajectory which appear to be improving. The company reaffirmed its mid-term targets, with profitability benefiting from COS optimization and scale. With respect to the demand environment, we like upbeat commentary around the core higher ed market and D2L’s evolving go-to-market and platform innovation. The reaffirmed guidance supports our positive view, centered around a sticky revenue base, product-market fit, and a path to strong cash flow profitability.”

In a research update to clients September 9, Sgro maintained his “Buy” rating and one-year price target of $11.00 on D2L.

The analyst thinks D2L will post Adjusted EBITDA of $6.6-million on revenue of $181.4-million in fiscal 2024. He expects those numbers will improve to EBITDA of $22.3-million on a topline of $206.4-million the following year.