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Raymond James Downgrades Instructure On Higher-Ed Software Slowdown

Priya Nigam

Instructure Inc (NYSE: INST) enjoys a strong competitive positioning, with win rates for its Canvas learning management system improving in 2018 to 80 percent, according to Raymond James.

The Analyst

Analyst Brian Peterson downgraded Instructure from Strong Buy to Outperform and maintained a $45 price target.

The Thesis

Proprietary checks indicate a meaningful deceleration in large deal activity in the North American higher-ed learning management system (LMS) market in 2018, with a double-digit decline in the number of full-year students, Peterson said in the Monday downgrade note. 

Despite this slowdown, Infrastructure’s Canvas LMS recorded an improvement in win rates in 2018, bagging the majority of large deals in the forth quarter, the analyst said. 

A resurgence in higher ed deals in 2019 seems unlikely given the modest year-on-year deceleration in the deal activity pipeline, Peterson said.

“To be clear, our revised rating does not reflect any concerns about the company's competitive positioning, but rather our belief that the 2H18 higher-ed slowdown isn't properly reflected in 2019 consensus." 

Instructure is scheduled to announce its 2019 guidance in February. Its shares are trading within about 10 percent of Raymond James' $45 price target.

Price Action

Instructure shares were down 8.05 percent at $37.18 at the time of publication Monday. 

Related Links:

A Preview Of Instructure's Q4 Earnings

Needham: Instructure Inc Price Closer To Reflecting Full Value of Fundamentals

Latest Ratings for INST

Date Firm Action From To
Jan 2019 Raymond James Downgrades Strong Buy Outperform
Oct 2018 Citigroup Maintains Buy Buy
Oct 2018 Morgan Stanley Maintains Overweight Overweight

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