Online education company, Pluralsight, Inc. PS is well-known among the Fortune 500 for training employees in software development and information technology through video courses.
The Analysts
Morgan Stanley analyst Brian Essex upgraded Pluralsight from Equal-Weight to Overweight, with an price target raised to $31.
The Thesis
With an attractive industry view and anticipation of steady growth, Essex outlined key catalysts to Pluralsight’s continued success.
“Expansion within large customers and incremental penetration into Fortune 500 accounts highlighted Pluralsight's opportunity to address a significant skills gap in the IT industry,” he said.
The penetration of these large accounts drives 50 percent of business to business growth, which proves the company’s sustainability despite challenging past quarters. According to Essex, “billings are a leading indicator for revenue growth.” In fact, Fortune 500 account involvement sits at 65 percent, with numerous additional accounts on deck.
Essex continues to observe Pluralsight’s incremental sales efficiency.
“The company has been investing in its enterprise sales force over the past few years. As the sales force matures, we are seeing better efficiency and anticipate it will improve over the next few years. We saw significant improvement this quarter with sales and marketing spend growing more in-line with B2B billing growth,” he said.
Essex raised his revenue forecast to reflect second-quarter earnings, and believes the company has a sustainable growth model; FY2018 expectations now sit at $223.4 million.
Price Action
Pluralsight shares were down 1.7 percent at $26.37 Friday afternoon.
Related Links:
3 Reasons Why Barclays Is Bullish On Pluralsight
The IPO Outlook For The Week: Mobility, Real Estate And Tech Ed
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