Raymond James Downgrades Instructure On Higher-Ed Software Slowdown

Instructure Inc 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. 

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