BUY
Docebo(DCBO-T)
27/05/2024
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research
Its recent earnings beat estimates, but revenue guidance of 17% to 18.5% was slightly below consensus estimates. Management noted weakness in its small and medium-sized business customers, but strength in its government and enterprise customers. One of the main remarks from its press release that concerned investors was an expectation for continued macro-economic headwinds to affect its SMB and lower mid-market customers, as well as a seven-figure negative impact on its ARR base resulting from a large enterprise customer terminating its agreement. In the earnings call, management reaffirmed that it is seeing pressure in its SMB segment over the past few months, but management expects it to diffuse over time.
The flip side to this issue is that management is seeing strong growth in its enterprise and government segment. It is still waiting on its FedRAMP certification, but it is expected to boost the company's government segment in 2025, and potentially somewhat this year.
It is not that cheap at 32X forward earnings, but certainly cheaper than previously. It continues to generate free cash flow, buy back shares, and improve its margins. Fundamentally, its metrics look good, but the churn in SMB customers is concerning investors, but we feel its foray into the enterprise and government sectors can help lift its guidance over the long-term.
$48.520