Global Digitization And Creator Trends Will Redefine Online Learning

Key Takeaways

• Thinkific's upmarket shift, advanced tools, and strong product adoption signal a potential upswing in recurring revenue and margin expansion beyond analyst expectations.
  
• Platform innovation, automation, and international expansion position Thinkific to outpace market growth, drive operating leverage, and secure a leading share in skills-based learning.
  
• Intensifying competition, economic headwinds, and technological shifts threaten Thinkific's revenue growth, customer retention, and long-term market differentiation, especially amid slowing organic user expansion.

Catalysts

Engages in the development, marketing, and support management of cloud-based platform in Canada, the United States, and internationally.

• Analysts broadly agree Thinkific's shift upmarket and focus on larger, more sophisticated customers will drive meaningful revenue growth and margin improvement; however, with record Plus bookings already achieved in a seasonally slow quarter and multiyear deals accelerating, the company is positioned for a much sharper and sustained upswing in recurring revenue and long-term net margin expansion than consensus expects.
  
• While analyst consensus points to new Commerce and AI-driven tools increasing ARPU and retention, actual adoption metrics-such as 80 percent-plus Commerce penetration in new cohorts and advanced analytics already winning high-profile customers from entrenched rivals-suggest an underappreciated inflection point in cross-sell rates and upsell-driven earnings growth over the next several quarters.
  
• The rapid proliferation of solopreneurs and the mass adoption of skills-based learning by both individuals and enterprises globally are likely to create exponential tailwinds for Thinkific, enabling the company to outpace market growth projections and cement a leading market share position, thereby sustainably driving revenue beyond current industry benchmarks.
  
• With continuous automation, platform scalability improvements, and a highly efficient go-to-market engine yielding permanent reductions in CAC and improved onboarding conversion, Thinkific is poised to deliver stronger operating leverage and enhanced cash flow generation relative to peers as it scales.
  
• The combination of Thinkific's global-ready, mobile-first platform and deep integration capabilities uniquely positions it to rapidly expand into high-growth international markets and capitalize on SaaS-driven displacement of legacy LMS systems, creating new, high-ARPU customer segments and unlocking elevated long-term earnings power.

Thinkific Labs Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Thinkific Labs compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Thinkific Labs's revenue will grow by 11.2% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Thinkific Labs will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Thinkific Labs's profit margin will increase from 1.8% to the average CA Software industry of 11.7% in 3 years.
• If Thinkific Labs's profit margin were to converge on the industry average, you could expect earnings to reach $11.1 million (and earnings per share of $0.17) by about July 2028, up from $1.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 29.9x on those 2028 earnings, down from 88.8x today. This future PE is lower than the current PE for the CA Software industry at 53.9x.
• Analysts expect the number of shares outstanding to decline by 0.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.47%, as per the Simply Wall St company report.

Thinkific Labs Future Earnings Per Share Growth

Risks

• Increasing macroeconomic pressure and a possible reduction in discretionary income among individuals and small businesses were observed through lower GMV across all customer cohorts, indicating that further economic downturns could shrink Thinkific's addressable market and lead to declining revenues.
  
• A competitive and fragmented market is intensifying, with management highlighting frequent customer migrations from other platforms and persistent pricing pressures, suggesting risks to net margins and the potential for slowed revenue growth due to increased promotional efforts or reduced pricing power.
  
• Evidence of slowing organic user growth is present in the form of Q1 gains driven partly by onetime or seasonal factors, and management's guidance that ARR growth will normalize at lower levels, which raises the risk of limited new customer acquisition and future revenue plateaus as easy opportunities are exhausted.
  
• Overdependence on SMB customers remains a challenge, with churn evident as Plus customers downgrade to lower-priced Self-Serve plans during macro headwinds or resource constraints, causing revenue volatility and undermining stability in recurring revenues and earnings.
  
• Secular risks from technological platform shifts and escalating content quality demands could undermine Thinkific's long-term differentiation, as AI-native and immersive learning environments gain traction and independent creators begin to struggle to meet rising learner expectations using Thinkific, potentially leading to increased churn and suppressed revenue growth.

Valuation

• The assumed bullish price target for Thinkific Labs is CA$5.46, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Thinkific Labs's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$5.46, and the most bearish reporting a price target of just CA$2.99.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $94.6 million, earnings will come to $11.1 million, and it would be trading on a PE ratio of 29.9x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of CA$2.2, the bullish analyst price target of CA$5.46 is 59.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.