DCBO price target raised to $100 at ATB Capital

Following the company’s fourth quarter results, ATB Capital analyst Martin Toner has raised his price target on Docebo (Docebo Stock Quote, Chart, News, Analysts, Financials TSX:DCBO).

On February 23, DCBO reported its Q4 and fiscal 2023 results. The company posted Adjusted EBITDA of $6.5-million on revenue of $49.3-million, a topline that was up 26.5 per cent over the same period a year prior.

“We are delighted to announce that our fourth quarter results surpassed our guidance for both revenue and profitability,” CEO Claudio Erba said. “As we look ahead to 2024, we have an ambitious product road map and remain focused on driving innovation into the learner experience by leveraging AI throughout our platform.”

On February 26, Toner maintained his “Outperform” rating on DCBO but raised his price target on the stock from $95.00 to $100.00, implying a return of 38.6 per cent at the time of publication. The analyst explained the reasoning behind the move in an update to clients.

“DCBO continues to make progress with enterprise customers and qualifying for large government contracts, and investments in the two efforts are proving to be synergistic,” he wrote. “DCBO continues to show margin improvement, proving the efficiency of its business model and improving quality metrics. Both, in our opinion, are worth a higher multiple. While Q4/23 results and Q1/24 guidance lacked strong revenue growth acceleration, which we believe is possible, DCBO’s results increased confidence in our forecast for a ~20% revenue CAGR and high-20% EBITDA margins, which imply the shares are undervalued at current levels. Our estimates are increased modestly, but reducing shares outstanding post the substantial issuer bid (SIB) and rolling forward our DCF drives a $5.00 increase in our price target to $100.00.”

Toner thinks DCBO will post Adjusted EBITDA of $31.8-million on revenue of $220.5-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $40.1-million on a topline of $262.5-million in fiscal 2025.

“Our $100.00 Price Target represents a return to target of 38.6%. Our 12-month price target is based on our discounted cash flow (DCF) model, using a weighted average cost of capital (WACC) of 11.5%,” the analyst concluded.  “We use a terminal growth rate of 3.0%, and an exchange rate of C$1.35/US$ (previously C$1.37/US$). Our DCF model implies a terminal Enterprise Value (EV)/Sales multiple of 3.1x in 2032, and our discounted terminal value of $1.6bn represents 66.1% of our total estimated EV of $2.3bn.”