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On Tuesday, Scotiabank (TSX:BNS) analyst Kevin Krishnaratne adjusted the price target for Docebo Inc (TSX:DCBO). (NASDAQ:DCBO) shares to $45.00, down from the previous target of $55.00, while maintaining a Sector Outperform rating on the company. The adjustment came after Docebo experienced a significant drop in its share price on Friday, when it plunged as much as 26% during intraday trading before recovering to close 14% lower.
The sell-off was attributed to a sharper than anticipated slowdown in subscription growth for the year 2025, with projections falling to 11.5% to 12.5%, compared to 20.3% in 2024. This decline has led to Docebo’s shares trading at less than 3.0 times its CY26 Sales. Despite the recent challenges, InvestingPro analysis shows the company maintains impressive gross profit margins of 81% and has achieved a revenue growth of 20% in the last twelve months. The company’s overall financial health score is rated as "GOOD" by InvestingPro analysts.
Krishnaratne pointed out several factors contributing to the current situation, including a high volume of contract renewals, macroeconomic headwinds affecting many SaaS firms, and increased pressure on deal cycles, particularly as Docebo’s sales pipeline now leans towards larger clients with longer-than-average negotiation periods.
Despite the near-term challenges and the expectation that the stock may trade within a certain range, the analyst remains optimistic about Docebo’s prospects. The company’s Enterprise ARR (Annual Recurring Revenue) is estimated to have grown by approximately 20% in Q4, and improvements in its Net Promoter Score (NPS) year-over-year were noted. Furthermore, the analyst highlighted a shift in use cases towards customer experience (CX) rather than employee experience (EX), which is believed to present less risk to seat counts.
Looking ahead, Krishnaratne identified potential catalysts for Docebo, including its Inspire event in April and the anticipated Federal Risk and Authorization Management Program (FedRAMP) Authority to Operate (ATO). Additionally, the company’s strong cash position, with over $90 million and no debt, was seen as providing support for stock buybacks. InvestingPro analysis suggests the stock may be undervalued at current levels, with 14 additional exclusive ProTips and a comprehensive Pro Research Report available to subscribers, offering deeper insights into Docebo’s financial health, valuation metrics, and growth potential.
The revised price target of $45 is now set at 4.5 times CY25 Sales, down from the prior multiple of 5.2 times, positioning it closer to the lower end of the spectrum among Human Capital Management (HCM) peers. This adjustment reflects Scotiabank’s cautious stance for the first half of the year but anticipates stronger trends in the latter half.
In other recent news, Docebo Inc . reported its Q4 2024 financial results, revealing an earnings per share (EPS) of $0.28, slightly surpassing the forecast of $0.27. However, the company’s revenue fell short of expectations, coming in at $54 million against a projected $56.25 million. This revenue miss has raised investor concerns, despite the EPS beat, highlighting a need for strategic adjustments. Additionally, Morgan Stanley (NYSE:MS) adjusted its price target for Docebo, reducing it to $43 from $61, while maintaining an Overweight rating on the stock. The firm noted that the company’s recent results and guidance fell short of expectations, contributing to the revised target. Despite these challenges, Docebo is actively pursuing growth through new AI-powered products and strategic market positioning. The company aims to transform into an AI-first learning platform, with plans to achieve FedRAMP certification by the end of Q3, potentially enhancing its competitive edge in government-related contracts. Docebo is also considering strategic mergers and acquisitions as part of its growth strategy.
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