How Analysts View Instructure After the Quiet Period

By Chris Lange Updated Jan 13, 4:19PM EST · Published Dec 8, 1:05PM EST

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How Analysts View Instructure After the Quiet Period — © Thinkstock

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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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.