On Thursday, Canaccord Genuity adjusted its stance on Learning Technologies Group (LTG:LN) (OTC: LTTHF), downgrading the stock from Speculative Buy to Hold, while setting a price target of £1.00.
The firm cited several headwinds facing the company, including both cyclical and structural challenges. LTG has been grappling with growth difficulties over the past two years due to weaker macroeconomic conditions and reduced enterprise spending.
Additionally, structural issues such as risks associated with Generative AI and client turnover at its PeopleFluent division have impacted the firm's performance.
Canaccord Genuity compared LTG to its highly indebted peer, Skillsoft, which is currently trading at approximately 5.9 times EV/EBITDA on the US market. The analysis suggested that the price target for LTG represents a significant premium of around 50% over Skillsoft's valuation.
The firm also referenced the recent take-private transaction of Kin+Carta, which was acquired at 14 times P/E ratio after experiencing a revenue decline. The deal for Kin+Carta occurred in early 2024.
The analyst from Canaccord Genuity assigned a 40% probability to the success of the GA bid at the current offer price for LTG. There is speculation that shareholders may wait for potential counterbids or a higher offer, potentially around 110p. However, should the bid fail, the analyst anticipates that LTG's share price could drop to between 75p and 80p.
The current share price of LTG, at 99p, was described as presenting a balanced risk/reward scenario. This assessment led to the decision to downgrade the stock to a Hold rating from its previous Speculative Buy rating.
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