These two Canadian e-learning companies are buying
For investors looking to add Canadian tech content to their portfolios, you may want to check out Docebo (Docebo stock quote, charts, news, analysts, TSX financial data: DCBO) and THinkific Laboratories (Thinkific Labs Stock Quote, Charts, News, Analysts, Financials (TSX: THNC), both of which have received recent buy notes from analysts.
In the pre-COVID era, educational technologies and e-learning had already become a force to be reckoned with, but add a pandemic scenario that kept workers and students at home and on their laptops and you have the makings of a global e-learning boom.
The global online learning market is expected to reach $ 350 billion by 2025, as businesses and educational institutions seek to improve their digital game. Industry indicator Chegg (Chegg Stock Quote, Charts, News, Analysts, Financials NYSE: CHGG) grew by leaps and bounds, closing 2020 with revenue up 57% from 2019 and reaching $ 644.3 million. (All figures are in US dollars, unless otherwise noted.)
The company, which offers student education support services like Chegg Study and Chegg Writing as well as its e-textbook business, said 2021 would end even better, with projected revenues of $ 805 million to $ 815 million. with an adjusted EBITDA between $ 295 and $ 300. million.
“The transition to online and hybrid learning is inevitable and with the accelerating trends we are seeing, we have the confidence to raise our forecast for 2021,” CEO Dan Rosensweig said in a February press release.
Those who invested in Chegg at the start of the pandemic performed well, with the stock doubling by the summer of 2020, but CHGG has not gained much ground since. For continued growth, you can instead look to the cloud-based learning platform in Canada Docebo, which has grown from around C $ 17 at the start of February 2020 to C $ 82 by the end of February 2020. year. And the stock hasn’t looked back either, posting a cumulative return of 30% to hit a new high this week of C $ 106.
But there should be more where it came from, according to Christian Sgro, an analyst at Eight Capital, who reported to clients on Docebo on Aug. 13. There, Sgro commented on Docebo’s last quarter, which saw the company – which provides learning management systems for medium and large enterprise clients – topped estimates with revenue of $ 25.6 million. dollars (up 76% year-over-year) versus Sgro’s call for $ 22.8 million and consensus forecast of $ 23.1 million.
“Docebo is executing the plan, with focused innovation and product leadership driving the penetration of a large and expanding TAM globally,” Sgro wrote in his report.
“There is little customer concentration, transaction sizes are steadily increasing, and we see the growing OEM channel strategy as an increase in that ramp. We are encouraged by management’s confidence in the company and the outlook and expect Docebo to maintain this impressive pace in the medium term, ”he said.
Sgro noted the company’s press in the original equipment manufacturers space where the company recently announced new OEM partners.
“We expect the company to form a model around the OEM structure and support services, which could bring more partners to join at an accelerated pace,” said Sgro.
As of this writing, Sgro has increased its target price from C $ 80.00 to $ 110.00 while maintaining its “Buy” rating, resulting in an expected return of 28%. Sgro forecasts full 2021 revenue growth of 60% for DCBO, followed by 35% growth for 2022.
For a different take on the online education space, Thinkific Labs has defined itself as enabling ‘knowledge entrepreneurship’, much like the e-commerce company Shopify calls itself the champion of knowledge. small business community. Vancouver-based Thinkific promotes its platform as a way for course creators to create, market, sell and distribute their educational products to the world.
The company closed a C $ 160 million IPO in April, giving it an opening market value of C $ 1.25 billion. So far, the stock has had its ups and downs, but National Bank Financial analyst Richard Tse sees a bright future ahead of him.
Thinkific released its second quarter 2021 financial statements in early August, which showed double year-over-year revenue at $ 9.1 million, slightly higher than the $ 8.9 million forecast by Tse and driven by growth in paying customers and higher than expected average revenue per user of $ 107.
It’s important to note that Tse sees a bit of a lead ahead for Thinkific, whose payment solution is currently being tested as its App Store launched in May.
“In our opinion, this is only the beginning for Thinkific and despite difficult year-to-year comparisons due to the COVID tailwind of the previous year, we are seeing a name that fits the thesis of ‘investment on display in our recent coverage launch report, ”Tse said. in a customer update on August 11.
“Thinkific is uniquely positioned in its course builder / learning marketplace and with incremental growth drivers such as Thinkific Payment, App Store and Partnership Networks (also in their early stages) we are seeing outsized growth ahead of the name even without the benefit of COVID. in their market, ”Tse wrote.
Tse reiterated its “outperformance” rating and target of C $ 20.00, which, at the time of publication, represented a one-year expected return of 26.9%.