Written by Ambrose O'Callaghan at The Motley Fool Canada
The S&P/TSX Composite Index was up 32 points in early afternoon trading on Friday, September 15. However, the S&P/TSX Capped Information Technology Index was down more than half a percentage point in the same trading session. Today, I want to zero in on an undervalued artificial intelligence (AI) stock that I’m looking to snatch up in the middle of September: Docebo (TSX:DCBO). In this piece, I want to explore why this AI stock is on my radar. Let’s jump in.
How has this tech stock performed over the past year?
Docebo is based in Toronto and operates as a learning management software company that provides AI-powered learning platforms in North America, Europe, and the Asia-Pacific region. Shares of this AI stock have increased 9.7% month over month at the time of this writing. The stock has climbed 20% so far in 2023. Investors who want to see more of its recent and past performances can play with the interactive price chart below.
Here’s why investors should seek exposure to this sector
The explosive potential of the AI space has shown itself in the first half of the 2020s. The emergence of ChatGPT put a brighter spotlight on AI development. A broad array of industries and companies are relying on progress in this space.
Investors should also be eager to get in on the development of educational software solutions. Grand View Research recently valued the global education technology market at US$123 billion in 2022. The same report estimated that this market would deliver a compound annual growth rate (CAGR) of 13% from 2023 through to 2030.
Should investors be happy with Docebo’s recent earnings?
This company released its second-quarter (Q2) fiscal 2023 earnings on August 10. Docebo delivered revenue growth of 25% to $43.6 million in Q2 2023. Meanwhile, subscription revenue was reported at $40.8 million. That represented 94% of total revenue — up 28% compared to the previous year. Gross profit also jumped 26% to $35.2 million.
Docebo reported adjusted net income of $4.7 million, or adjusted earnings per share (EPS) of $0.14 — up from an adjusted net loss of $0.7 million, or $0.02 per share in the prior year. Annual recurring revenue shot up $34.7 million year over year to $172 million. EBITDA stands for earnings before interest, taxes, depreciation, and amortization, aiming to give a clearer picture of a company’s profitability. This company delivered adjusted EBITDA of $3.1 million in Q2 2023 compared to an adjusted EBITDA loss of $0.3 million in the previous year.
On the business front, Docebo announced that total customers rose to 3,591 compared to 3,106 in Q2 2022. The company also announced a big customer win with a Big Five U.S.-based global technology leader after the close of the June quarter. This will allow Docebo to utilize its generative AI services to “transform the delivery of personalized learning at scale.”
Why I’m buying this tech stock today
This company boasts an immaculate balance sheet at the time of this writing. Shares of Docebo are trading in favourable value territory compared to its industry peers. Better yet, this AI stock is geared up for big growth in the education technology solutions and AI spaces going forward. I’m looking to snatch up Docebo as we move into the autumn.
Before you consider Docebo, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2023... and Docebo wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 26 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 8/16/23