ATB Capital Markets analyst Martin Toner downgraded Docebo Inc. to “sector perform” from “outperform,” citing valuation concerns. His price target remains at C$75 and other than a stock rising a little too quickly, he found a lot to like in the company’s latest earnings report.
Docebo on Friday reported Q3/24 consolidated revenue of $55.4 million (19.2+% y/y), a beat on consensus of $54.2 million. Adjusted EBITDA of $8.7 million beat consensus of $8.3 million. The company reported annual recurring revenue (ARR) of $214.1 million (+18% y/y), marking the fourth consecutive sequential deceleration, but incremental ARR was $8.2 million, the second quarter of improvement.
Management raised its annual guidance from FY24 revenue growth of 18%-19% to annual growth of 19.5%. Management noted that its pipeline quality is improving, and though small and medium-sized business customers remain cautious, management expects continued penetration into mid-market and enterprise segments.
“We continue to believe that DCBO’s current valuation undervalues long-term growth and that as enterprise spending improves, DCBO’s revenue growth will further accelerate,” Mr. Toner said.
Given the stock rose 21% over the past month, he felt the downgrade was prudent, but added: “An IT spending recovery or faster than expected revenue from the government sector are two catalysts that could be accretive to our growth forecast and would cause us to revisit our sector perform rating.”