Investment Idea: Instructure Holdings, Inc. (INST)
Instructure Holdings, Inc. (INST) - Investment Idea
Price (as of 10/26/2023): $23.6 Market Cap: $3.5B
1. Executive Summary
Instructure Holdings (INST) presents a compelling investment opportunity driven by its dominant position in the higher education Learning Management System (LMS) market and expanding offerings in K-12 and professional development. We believe INST is undervalued given its strong recurring revenue base, robust growth prospects fueled by cross-selling opportunities and international expansion, and potential for margin expansion.
2. Investment Thesis
We are bullish on Instructure Holdings based on the following factors:
- Dominant Market Position in Education LMS: Canvas Learning Management System holds a leading market share in higher education and is increasingly gaining traction in the K-12 segment. This provides a strong foundation for recurring revenue and future growth. The stickiness of LMS platforms translates to high customer retention rates and predictable cash flows.
- Cross-Selling Opportunities & Product Expansion: Instructure is effectively cross-selling its suite of products, including Canvas Studio, Canvas Catalog, and Canvas Assessment (including MasteryConnect and Certica), to its existing customer base. This provides a significant opportunity to increase revenue per customer and drive overall growth. The Elevate Data Sync offering also presents significant revenue potential as institutions increasingly prioritize data-driven decision-making in education.
- Growth in Assessment and Development Market: The education space is not simply a learning management marketplace. Leveraging their mastery connect and certica assessment tools with analytics, instructure has created a moat of robust student assesment. This will continue to drive adoption and increase growth.
- International Expansion: Instructure is actively expanding its presence in international markets, which offers a significant runway for growth beyond its core North American market. This expansion is likely to be aided by the scalability of its cloud-based platform and increasing global demand for online learning solutions.