How Analysts View Instructure After the Quiet Period

Technology

Published: December 8, 2015 1:05 pm

Last Updated: January 13, 2020 4:19 pm

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.