Canaccord Genuity lowers target price on Learning Technologies

Canaccord Genuity said this raises the possibility of further revenue/estimate cuts from Learning Technology as only around a quarter of its sales were contractually recurring, whilst the remainder comes from more discretionary learning and training content production and consulting, as well as HCM software implementation services funded by HR and IT budgets.

From an industry perspective, the German bank also highlighted that close to 60% of sales were to "more macro-sensitive verticals" such as automotive, manufacturing, financial services, consumer, retail, and logistics/transport.

Reflecting management's new underlying earnings outlook of "high-single-digit growth" and higher interest costs and tax, Berenberg cut its 2023-24 revenue forecasts by roughly 1% and adjusted underlying earnings expectations by 10-13%.

"After the strong GPS accretion uplift last year, our downgraded forecasts imply broadly flat adjusted earnings per share (pre SBC) of circa 9.0p this year with an expected growth acceleration in 2024+ driving an 8% 2022-25E EPS compound annual growth rate," said Canaccord, which reiterated its 'hold' rating on the stock.

"In light of the muted growth and demand visibility, we view the shares' current 12.0x 2023E price-to-earnings multiple as fair."

Reporting by Iain Gilbert at Sharecast.com