Thinkific is an undervalued stock, National Bank says

After a meeting with management, National Bank Financial analyst Richard Tse continues to believe there is money to be made on Thinkific Labs (Thinkific Labs Stock Quote, Chart, News, Analysts, Financials TSX:THNC).

In a research update to clients January 21, Tse said this is a cheap stock.

“We had the opportunity to meet investors today with Thinkific CFO, Corinne Hua,” Tse wrote. “Overall, we believe Thinkific is one of the most undervalued names in our coverage universe at 1.2x EV/Sales on FY25E. In our view, we believe the name continues to be uniquely positioned in its course creator / learning market with growing option value from scaling growth vectors like Thinkific Commerce and Plus.”

Tse has maintained his “Outperform” rating and price target of $4.50 on Thinkific, implying a return of 49.5% at the time of publication.

The analyst thinks THNC will post Adjusted EBITDA of $2.8-million on revenue of $67.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $3.7-million on a topline of $76.4-million in fiscal 2025.

“In our view, Thinkific is a better company – strategically and operationally – than it was following its IPO just under 4 years ago (April 2021),” he argued. “Our take is that the Company has become increasingly more diligent around refining its target market and related personnel with how it operates (i.e., revised compensation targets towards growth). That growing discipline has had the Company refining its go-to-market customer acquisition and related customer acquisition costs (CAC) towards customers with the highest return potential. The result is that it has put the Company in a position of growing operating leverage with an Adj. EBITDA margin of 5.4% in Q3’24 with a line of sight to 10%.”