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Docebo chief executive officer Claudio Erba says the COVID-19 lockdowns forced companies to quickly rethink how they work and what technologies are needed.

Nidun Chandrakumar

Shares of employee-training software company Docebo Inc. have more than doubled since wide-scale lockdowns were implemented across the globe in mid-March, as investors seek out names expected to benefit from the sudden shift to working and learning from home.

On Friday, the stock reached an all-time high of $24.44 before closing at $23.88, a 49-per-cent increase from its initial public offering price of $16 on Oct. 8. It has been building momentum since the company reported a better-than-expected first quarter on May 12.

Docebo chief executive officer Claudio Erba says the COVID-19 lockdowns forced companies to quickly rethink how they work and what technologies are needed. That has led to a spike in demand for its e-learning products. Docebo, which has more than 400 employees, is officially headquartered in Toronto but more than half of the staff, along with the CEO, live and work in northern Italy.

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“Evolution is never gradual, it’s made by jumps,” Mr. Docebo said in a teleconference interview with The Globe and Mail earlier this month. "And jumps are created by crises. What we are seeing is, from our customers, a crazy increase of adoption.”

Docebo provides cloud-based software-as-a-service learning platforms to train external work forces. The company says it had 1,938 customers at the end of the first quarter – including the recent addition of Walmart Inc. and Italian pasta giant Barilla – up from 1,596 a year earlier. It says about 70 per cent of them are in North America and the rest in other parts of the world such as Europe and the Middle East. Other customers include companies such as Heineken NV, Uber Technologies Inc., Thomson Reuters Corp. and L’Oréal SA, according to its latest investor presentation. It also says 90 per cent of its revenues are recurring, meaning from the same customers.

Despite benefiting from the ramifications of COVID-19, the company remains cautious. Mr. Erba sees a mix of “problems and opportunities," which is why the company, like many others at this time, isn’t providing guidance.

“We really don’t know what the future will give us because we don’t know if there will be a second wave or not,” and what countries or sectors will be most affected, he says.

Mr. Erba says his team is working to ensure the company's growth is sustainable long-term.

“We’re not burning a crazy amount of cash or doing crazy expenses," he says. "We are very pragmatic but we are building the software for the future.”

Docebo’s stock hit its lowest point of $10.30 on March 18 amid the market meltdown caused by the coronavirus crisis. The stock then rocketed higher after its first-quarter earnings report.

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Docebo reported revenue of US$13.5-million, up 56.7 per cent from the same quarter last year and ahead of expectations of US$12.4-million. Net income of US$743,000 or 2 US cents a share compared with a loss of US$2.5-million or 11 US cents a year earlier. Analysts were expecting a loss of 5 US cents, according to S&P Capital IQ.

The beat led many analysts to increase their price targets. Six out of seven analysts that cover the stock have a buy recommendation, and one has a hold, with an average price target of $24.36, according to Bloomberg.

Ryan Modesto, CEO of the independent firm 5i Research, says Docebo is a high-growth, high-margin company with a “sticky” customer base in an industry that is in high demand for investors.

The risks for investors are stock price volatility given that it’s a smaller cap technology name with a relatively high valuation, trading at six times forward sales, which is considered expensive.

"But if you compare to software peers, it's on the lower end," Mr. Modesto says of the valuation.

While the stock has bounced back from its March low, Mr. Modesto doesn't believe longer-term investors have missed their chance to earn some higher returns on the stock.

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"It's one of those names you want to hold on for about three years and be able to ignore the volatility."

Stephanie Price, an analyst at CIBC World Markets, says Docebo’s products are well positioned as more corporations move toward online learning. She points to the company’s 61 per cent year-over-year subscription growth in the first quarter and the two “significant customer wins,” namely, Walmart and Barilla. Ms. Price points out that the company had almost no interruption to its sales cycle amid the COVID-19 crisis.

While expenses were higher than expected in the quarter, owing to new hires, Ms. Price expects costs to remain “relatively stable from here.” Citing growth in the COVID-19 environment, Ms. Price reinstated her prepandemic price target of $22, up from $18, and maintained her “outperformer” rating – the equivalent of a buy.

Canaccord Genuity analyst Robert Young described the growth trends for Docebo as “very encouraging.” He increased his target on the stock to $28 from $20 and maintained his “buy” recommendation.

“In general, we expect that companies are grappling with the need to activate business continuity plans and new work-from-home policies and protocols,” Mr. Young said in a May 13 note.

National Bank analyst Richard Tse described Docebo as “a growth name that’s worth knowing.”

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“While this was a name we liked even prior to this pandemic, it’s also one that will likely be a beneficiary on the other side as the [work-from-home] shift will have some permanency,” he said in a May 12 note, while increasing his target to $23 from $20.

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