Is D2L stock a buy? (June, 2024)

Its first quarter results have been put to bed and Eight Capital analyst Christian Sgro remains bullish on D2L (D2L Stock Quote, Chart, News, Analysts, Financials TSX:DTOL).

On June 4, DTOL reported its Q1, 2025 results. The company posted Adjusted EBITDA of $4.0-million on revenue of $48.5-million, a topline that was up 10% over the same period a year prior.

“It was a solid start to fiscal 2025, highlighted by strong growth in our subscription and support revenue and annual recurring revenue and meaningful gains in our operating profitability. These results put us on a path to achieve our full-year growth outlook, which includes exiting the year with low- to mid-teen adjusted [earnings before interest, taxes, depreciation and amortization] margin,” said John Baker, chief executive officer of D2L. “In our 25th year of transforming the way the world learns, with sustained momentum and high win rates in our core markets, a strong and growing cash position, and a world-class team, we have never been more encouraged by the outlook and opportunity for D2L.”

The analyst said the quarter provided more evidence of the company’s excellent execution.

“D2L’s in-line first quarter results and unchanged outlook are a display of execution against above-industry growth and strong margin expansion targets for the year,” he wrote. “The reputation of the platform and its commitment to innovation continue to offer an edge, against legacy or distracted competitors. Aggressive margin expansion is being proven by the posted results and is a trend we expect to continue. Barring any M&A activity, we expect the Fusion conference in July to serve as the next update and catalyst for D2L.”

In a research update to clients June 5, Sgro maintained his “Buy” rating and price target of $13.00 on DTOL, which closed June 4 at $8.53.

The analyst thinks DTOL will post Adjusted EBITDA of $21.9-million on revenue of $200.0-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $36.6-million on a topline of $222.8-million in fiscal 2026.

“We are maintaining our BUY rating and our target price of C$13.00 based on 13x C2025E EV/adj. EBITDA. D2L currently trades at 7.5x compared to key academic learning peers at 16.4x. Key risks to our target include spending slowdowns or intensifying competitive conditions,” the analyst added.