Tuesday, Scotiabank reduced its price target on Docebo Inc. (NASDAQ:DCBO) shares to $50 from the previous $65, while maintaining a Sector Outperform rating on the company's stock.
The adjustment comes after Docebo's shares fell approximately 20% last Friday, following the company's release of weaker-than-anticipated guidance for the calendar year 2024.
Docebo, which specializes in cloud-based learning platforms, reported a strong first quarter but provided a revenue growth outlook for the high end at 18.5%, which was below market expectations by roughly $6 million.
The shortfall was attributed to a combination of factors including foreign exchange impacts, a downturn in the small and medium-sized business (SMB) segment, and a customer downgrade.
The analyst from Scotiabank acknowledged the market's negative response, which has been a common trend for SaaS (Software as a Service) stocks this earnings season when they miss guidance forecasts. However, the analyst believes that Docebo's stock is currently oversold.
The revised price target of $50 is based on a multiple of 5.5 times the company's projected CY25 Sales, down from the previous multiple of 7.0 times.
This valuation is approximately 0.4 times the CY25 enterprise value to gross profit growth ratio, compared to peers which are valued around 0.5 times.
The analyst's perspective suggests a conservative approach, considering the current valuation as a "free option on SMB," meaning there is potential upside if the small and medium-sized business segment performs better than expected.
InvestingPro Insights
In light of Scotiabank's recent price target adjustment for Docebo Inc. (NASDAQ:DCBO), real-time data and insights from InvestingPro can offer additional context to investors. Docebo's Market Cap stands at $1.1 billion, with a high Price/Earnings (P/E) Ratio of 177.47, which adjusts to 124.41 when considering the last twelve months as of Q1 2024. Despite the high P/E, the company boasts an impressive Gross Profit Margin of 80.88% in the same period, reflecting its strong ability to retain revenue after the cost of goods sold.
InvestingPro Tips highlight that management's aggressive share buybacks and the company's position of holding more cash than debt could be seen as positive indicators of confidence in the company's financial health. Additionally, with a high shareholder yield and expectations for net income growth this year, there may be a silver lining for investors despite recent stock performance. Notably, Docebo's stock has experienced significant volatility, with a 22.77% drop in price total return over the past week, which some analysts on InvestingPro might interpret as the stock being in oversold territory.
For investors looking to delve deeper into Docebo's financials and future prospects, InvestingPro offers a wealth of additional tips, with 19 more insights available for those seeking a comprehensive analysis. To explore these further, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain a more informed perspective on whether Docebo's current market position represents a buying opportunity or a sign of caution.
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