National Bank Financial analyst Richard Tse thinks highly of Thinkific (Thinkific Labs Stock Quote, Chart, News, Analysts, Financials TSX:THNC), reiterating his "Outperform" rating and target price of C$20.00/share with an estimated total return of 26.9 per cent in his latest update to clients on Wednesday. Founded in Vancouver in 2012, Thinkific is an online technology platform for course creators, which gives creators the ability to build, market, sell and deliver their products while requiring no specialized technical expertise. The company’s clients currently cover 165 countries worldwide with Thinkific’s revenue coming from recurring subscription services. Tse’s latest analysis comes after Thinkific reported second quarter 2021 financial results, which Tse deemed to be in line with expectations. “Thinkific is uniquely positioned in its course creator/learning market and with incremental growth drivers like Thinkific Payment, App Store and Partnership Networks (also in their early days), we see ample outsized growth in front of the name even without the benefit of COVID on their market,” Tse said. Thinkific posted revenues of $9.1 million in the second quarter for a year-over-year organic growth of 101 per cent, matching National Bank projections and slightly beating the consensus estimate of $8.9 million. Thinkific’s growth was primarily driven by a 68 per cent growth in paying customers, while its $107 average revenue per user (ARPU) beat National Bank’s $105 ARPU projection. (All figures in US dollars except where noted otherwise.) With seasonality and various COVID reopenings taken into account that took some learning offline, Thinkific’s gross merchandise value report of $102.5 million came in below National Bank’s $120 million estimate, though it still represented a 48 per cent year-over-year growth. Adjusted EBITDA came in at a $4 million loss as Thinkific continued to spend on headcount and marketing, with investments across various sectors of the business. Tse expects the spending to continue, with Thinkific’s guidance for Q3 suggesting EBITDA losses will come in between $7.6 million and $8.2 million, though Tse is not concerned given the company’s early phase of operations. "We believe the growth of Thinkific and our industry is in its early innings,” said Greg Smith, Co-Founder and CEO of Thinkific in the company’s August 10 press release announcing its results. “Our large and growing addressable market combined with the strength of our platform as the core operating system for Course Creators continues to drive confidence in our significant long-term growth opportunities. The introduction of the Thinkific App Store and Thinkific Payments enhance the functionality available to Course Creators to help their businesses succeed, as well as drive our growth through the expansion of Paying Customers and ARPU." Thinkific’s recent financial reports have prompted slight revisions to Tse’s annual financial projections, as he is now projecting revenues of $38.1 million for 2021 (80.6 per cent projected year-over-year increase) instead of the original $37.9 million estimate, while Tse’s 2022 revenue projections now come in at $68.9 million (80.8 per cent projected year-over-year increase) compared to the original estimate of $68.6 million. As Thinkific continues to invest, the company’s adjusted EBITDA projections continue to grow, with Tse now projecting a $20 million loss in adjusted EBITDA for 2021 instead of the originally estimated $16 million loss, with his 2022 forecast now showing a $24.3 million estimated loss, modified from the original $23.2 million loss. Valuation data is also coming into focus through Tse’s projections, with the EV/Sales multiple forecast to drop from the reported 39.1x in 2020 to 21.6x in 2021, dropping again to a projected 12x in 2022. Overall, Tse believes the company is still in its early days and is in a strong position to continue its growth. “We believe Thinkific is an early leader in the online learning market with a competitive platform that offers numerous features for content creators,” Tse said. “With incremental growth drivers such as Thinkific Payment and Thinkific App Store, we see ample runway for growth from new customers to ARPU expansion for existing customers.” At press time, Thinkific Labs was trading at C$14.88/share on the Toronto Stock Exchange, down one cent from its Wednesday closing figure of C$14.89/share. Overall, Thinkific shares have lost about five per cent of their value through 2021, with its high point coming on June 2 at C$19.00/share. Thinkific took another step in its growth in late July after launching Thinkific Payment, a payment processing service embedded in the company's online education platform, to a small test group of course creators with the intent of becoming the primary payment solution for North American content creators by the end of this year, supplementing the Thinkific App Store launched on May 4. "With Thinkific Payments embedded in the Thinkific Platform, we can provide more products designed for the intersection of education and commerce," said Peter Fitzpatrick, VP of Payments at Thinkific, in a July 28 press release. "As we deliver features to fulfill our vision for the future, course creators will be able to leverage tools to grow faster, automate administration, and improve their students' journeys. Having built on Stripe, course creators can rest easy knowing their transactions are running on the internet's best financial services technology."