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THNC stock downgraded at ATB Capital

THNC Stock

Following the release of the company’s most recent results, ATB Capital analyst Martin Toner has downgraded Thinkific Labs (Thinkific Labs Stock Quote, Chart, News, Analysts, Financials TSX:THNC).

On March 4, THNC reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $600,000 on revenue of $15.6-million, a topline that was up 13 per cent over the same period a year prior.

“Thinkific delivered a solid Q4 to end what was truly a milestone year for the company,” CEO Greg Smith said. “In 2023 we achieved our cost efficiency and productivity targets, while continuing to grow the top line in double digits. We also released more new and innovative products and features in the past 12 months than in any other time in our history. The Thinkific platform has never been easier for our customers to start a business, sell their digital products and grow their businesses to new heights. We are seeing evidence of this success of our customers in key performance metrics in the business. “This sets the stage for 2024 where we intend to incrementally invest in those areas of the business we have already seen significant momentum. Thinkific is in a good position to accelerate top-line growth while maintaining our commitment to remain profitable. Our primary focus continues to be on the success of our customers and providing them with the tools they need to grow their businesses.”

Following the release of the results, Toner downgraded THNC from “Outperform” to “Sector Perform” and raised his price target on the stock to $4.50 to from $4.00, implying a return of 20 per cent at the time of publication.


In a research update to clients, the analyst explained his reasoning.

“After market close on March 4, Thinkific reported Q4/23 consolidated revenue of $15.6mm (+13.0% y/y), beating consensus of $15.2mm and representing flat sequential growth,” Toner noted. “Adjusted EBITDA of $0.6mm beat consensus of $0.3mm and net income of $0.3mm beat consensus of a $1.2mm loss. Management’s Q1/24 revenue guidance of $15.8mm-$16.0mm, implying growth of 12.0-13.5%, was in-line with consensus. The Company capped off FY23 with impressive cost management resulting in two consecutive quarters of positive quarterly adjusted EBITDA. THNC is also pursuing newfound levers to help the Company increase its value proposition to customers and monetize that value. However, the Company has continued to struggle to see meaningful paid customer additions, and lacks the size to meaningfully improve profitability without an inflection in the revenue growth rate. Despite the slightly improved outlook, we downgrade THNC to Sector Perform given the low return to our target price. We will look for evidence that efforts to convert the top-of-funnel pipeline are translating into paying customer growth, which would significantly improve the long-term growth outlook.”

Toner thinks THNC will post Adjusted EBITDA of $900,000 on revenue of $67.1-million in fiscal 2024. He expects those numbers will improve to EBITDA of $1.6-million on a topline of $81.4-million in fiscal 2025.

“Our C$4.50 Price Target indicates a return to target of 20.0%. Our price target is based on our discounted cash flow (DCF) model, using a weighted average cost of capital (WACC) of 14.5%, a terminal growth rate of 3.5%, and an exchange rate of C$1.35/US$ Our DCF model implies a terminal EV/Sales multiple of 1.6x in 2033. Our discounted terminal value of $123.2mm represents 65.4% of total EV of $188.3mm,” he concluded.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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