New Analyst Coverage Seeing its stock’s valuation as “attractive relative to its growth and market opportunity,” BMO Nesbitt Burns analyst Thanos Moschopoulos initiated coverage of Thinkific Labs Inc. (THNC-T) with an “outperform” rating on Tuesday.
The Vancouver-based company, which provides a platform for entrepreneurs and businesses to create and run online courses, began trading on the Toronto Stock Exchange in late April after a $160-million offering led by BMO Capital Markets and CIBC Capital Markets.
“At the risk of oversimplifying, Thinkific is, essentially, a Shopify for creating and selling courses online (time will tell whether it’s the Shopify for this category, as opposed to a Shopify; but we think it has the potential to be the former),” said Mr. Moschopoulos.
“Shopify has empowered entrepreneurs and SMBs to launch and operate their own e-commerce businesses, without requiring them to have any programming ability and while freeing them from having to sell through a middleman such as Amazon. Similarly, Thinkific allows its customers to deliver and monetize online courses, through an easy-to-use platform that can assist them in finding and retaining an audience, while also allowing them to retain full control of their business, branding and content.”
The analyst thinks it’s possible for Thinkific to sustain a 70-per-cent-plus revenue compound annual growth rate over the next three years, pointing to “its competitive position in a large potential TAM, which makes it one of the fastest-growing publicly-traded SaaS companies.” He also feels the launch of its Payments offering will allow it to “more directly profit from its customers’ success and should further support its strong unit economics.”
“The fact that it’s a smaller company means that there’s a higher level of potential execution risk. However, we believe it has a platform, management team, market position and market opportunity that should position it well to succeed,” he added.
Mr. Moschopoulos set a target of $17 for the company’s shares.
“Our $17 target price is based on 15.5 times calendar 2022 estimated EV/sales — which, in our view, is a multiple that strikes a balance between Thinkific’s smaller size, relative to SaaS comps, and its much stronger expected growth,” he said.
Elsewhere, Canaccord Genuity’s Robert Young initiated coverage with a “buy” rating and $18 target.
“Thinkific’s ARR has been growing sales at an impressive CAGR of 160 per cent since 2015 while generating positive CFO,” said Mr. Young. “The e-learning space was gaining momentum well before the COVID-19 pandemic struck, which has thrown gas on an already growing fire. That said, we do expect revenue growth to moderate post COVID to a more manageable 60 per cent-pplus profile, still in a top tier. Supported by its US $150-million IPO proceeds, Thinkific is investing heavily in its R&D and sales & marketing functions in support of continued growth and expansion of its product offering.”