Canadian investors should consider buying quality growth stocks when the equity markets experience a pullback. Generally, growth stocks deliver outsized gains in a bull run but trail the broader markets significantly when sentiment turns bearish. However, if you buy the dip, you can generate game-changing returns over time.
Valued at a market cap of $1.28 billion, Docebo (TSX:DCBO) is a TSX stock down 64% from all-time highs. Despite the ongoing drawdown, the TSX tech stock has returned 165% to shareholders since its initial public offering in October 2019. Let’s see why Docebo may be the smartest TSX stock to buy with $1,000 right now.
Is the TSX tech stock a good buy in March 2025?
Docebo is repositioning itself from an enterprise learning management system (LMS) provider to an “AI-first learning platform,” Chief Executive Officer Alessio Artuffo emphasized during the company’s fourth-quarter (Q4) earnings call. The shift comes as Docebo reports a decrease in net revenue retention rate to 100%, down from 104% in the previous year.
Docebo, which currently serves over 40 million users globally, is betting heavily on generative AI and a concept called “Agentic AI” to differentiate itself in the competitive learning technology market. Artuffo highlighted that the company expects its user base to reach approximately 100 million over the next five years.
“The workforce is changing. There is work transformation occurring. Over the next five years, about 40% of the workforce and their skills are going to change dramatically,” Artuffo said. This transformation is driving Docebo’s push toward “hyper-personalized learning” that is “automated, highly experiential, hands-on and effectively measurable.”
Three recently released product modules are showing early traction, with attach rates of over 15%, helping boost new customer average contract value (ACV) to US$83,000, up 17% year-over-year. Meanwhile, Docebo reported a 200% increase in contracts of five years or greater, indicating strong enterprise customer confidence.
In a significant development for future growth, Docebo expects to achieve FedRAMP Authority to Operate (ATO) status by the end of Q3 of 2025, allowing it to bid on U.S. federal government contracts. The company has already secured a sponsoring agency and begun the audit process.
Simultaneously, Docebo announced a headcount reduction as part of its strategy to become “AI-first.” The company plans to reinvest savings into hiring for AI-specific roles and upskilling current employees.
However, investors should consider certain risks. Most important is that Docebo’s largest contract is up for renewal in Q1 of 2025, which should materialize. Further, the effectiveness of Docebo’s AI investments remains unproven as the company transitions from traditional LMS to an AI-driven platform. There are also execution risks associated with the ongoing leadership changes (including a departing chief financial officer).
Is DCBO stock undervalued?
With US$92 million in cash, Docebo is considering both stock buybacks and potential merger and acquisition opportunities as the market presents “opportunities that are going to broaden our impact in the overall learning stack,” according to Artuffo.
Analysts tracking DCBO expect revenue to rise from US$217 million in 2024 to US$241.6 million in 2025 and US$273.5 million in 2026. Comparatively, adjusted earnings are forecast to expand from US$1.04 per share in 2024 to US$2 per share in 2027. If the TSX stock is priced at 45 times trailing earnings, it will trade at US$80 per share in early 2028, indicating an upside potential of over 150% from current levels.
For investors, Docebo represents a calculated bet on AI transforming corporate learning, but with revenue retention challenges and ongoing strategic repositioning, near-term volatility may persist.
