Stifel analyst Suthan Sukumar has initiated coverage of D2L (D2L Stock Quote, Chart, News, Analysts, Financials TSX:DTOL) with a “Buy” rating and twelve-month price target of $14.00.
As reported by the Globe and Mail, the analyst thinks the ed-tech firm is well positioned.
“We believe a commitment to innovation and stronger go-to-market execution have elevated D2L’s competitive positioning in its core market of higher-ed, allowing it to capture nearly 50 per cent of global deal activity last year,” he wrote. “This inflection from the mid-teens in prior years is reinforced by consistent customer feedback that points to a compelling product/platform experience that helps bridge the gap with market-leader Canvas. While there is potential for a rebound in the K-12 market with anticipated Federal funding tailwinds, we see more opportunity with corporate learning and its intersection with higher-ed, alongside growing international penetration, to sustain accelerated double-digit organic growth with EBITDA and FCF expansion as well as line-of-sight to rule-of-40 longer-term.”
Sukumar explained his take on the stock’s valuation.
“D2L trades at 0.8 times calendar 2025 estimated Sales/5 times C25E EBITDA, vs. EdTech peers at 3 times/19 times and education LMS peers at 7 times/18 times, despite a pristine balance sheet and re-accelerating growth, profitability and cash flows,” he said. “While D2L doesn’t share the same scale opportunity of a high-growth D2C-model like DUOL at the high-end of EdTech peers (1-11 times), there are several small-cap names with comparable (or lower) growth and profitability at 1-2 times, which we think supports limited downside. Our $14/share target implies 2 times C25E Sales. We see multiple expansion with continued execution on growth and profitability upside, with a larger market cap supporting a further rerate to larger, more established LMS peers at 7 times as visibility improves to a rule-of-40 profile.”
At press time, shares of D2L were even at $7.30.
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