How Analysts View Instructure After the Quiet Period
Now that the quiet period is over for Instructure, we can get a better view of what to expect from the company as its underwriters support its valuation and give an outlook as to where this company can go.
Instructure Inc. (NYSE: INST) had its initial public offering (IPO) in November and quietly entered the market. This was a time when many IPOs were being grilled over their valuation, examples being Match or even Square. But now that the quiet period is over for Instructure, we can get a better view of what to expect from the company as its underwriters support its valuation and give an outlook as to where this company can go.
24/7 Wall St. obtained a report from Jefferies detailing its outlook on where the stock stands to go.
The brokerage firm believes Instructure is well-positioned to address its core academic Learning Management Systems (LMS) market and to broaden its customer base into the larger corporate segment, for a $4.1 billion aggregate total addressable market. Jefferies expects continued share gains in higher education and K-12, and early traction in corporate LMS to drive 63% 2015 growth, a 39% compound annual growth rate through 2018.
Ultimately, Jefferies initiated coverage with a Buy rating and a $25 price target, implying upside of about 26% from the current price level.
Since launching Canvas in 2011, most revenues have come from the U.S. higher education market, where Jefferies expects continued share gains to drive 24% growth, and sees K-12 and corporate segments growing at over double this rate, driven by increased LMS adoption and below-market pricing.
New subscription annual contract value (ACV), which the firm views as the most important growth metric for a software-as-a-service (SaaS) company, remains very strong at a conservatively estimated 54% this year, down modestly from 71% in 2014. Jefferies believes that if recent trends continue, the U.S. academic LMS segments should contribute 60% to 85% of the new subscription ACV implied in its 2016 estimates.
A few other analysts weighed in on Instructure:
- Goldman Sachs initiated coverage with a Buy rating and a $25 price target.
- Needham initiated coverage with a Buy rating and a $25 price target.
- Oppenheimer initiated coverage with an Outperform rating and a $25 price target.
Shares of Instructure were trading up 2.8% at $18.50 Tuesday afternoon, with a post-IPO range of $17.11 to $19.18.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
