Instructure Holdings Inc (NYSE:INST) stock rose 2.48% (As on July 7, 11:13:01 AM UTC-4, Source: Google Finance) after KeyBanc Capital Markets analyst Devin Au initiated coverage of the company at Overweight with a $32 price target. The analysts told investors in a note that there is more room for expansion for the company. They added that INST has a strong position in LMS and is poised for continued share gains compared to legacy on-prem solutions. Au sees “interesting” growth opportunities in international and cross-sells, positioning the company as the vertical leader in the education learning management system, LMS, market. With ~40% market share in higher ed and ~30% share in K12, Instructure is the LMS market leader in the U.S., the analyst adds.

Given that 40% of U.S. K12 are still using free Learning management system tools, and 70% of international higher educators are utilizing legacy on-prem solutions, there remain vast greenfield opportunities for Instructure to gain shares in the near and long term, notes the analyst.

The analyst notes that Instructure has expanded its product offering to >10 (from solely LMS historically) and has strengthened its cross-sell motion.

In addition, they see it benefitting from the “NT K12 budget flush in the US, along with interesting growth opportunities in international and cross-sell and Rule of 50 profile.”

The company is also expected to gain from the government funding passed during the pandemic to support education initiatives, which is expected to expire in September 2024, providing INST with near-term adoption catalysts.

The analyst expects Instructure to expand the EBITDA margin towards 40%, with leverage primarily from improving cost structure and optimizing the on-/off-shore employee mix.

Given the above, the analyst expects FY23 revenues of $524.6 million, while FY24 revenues are expected to be $577.3 million.

The analysts see Instructure positioned to be the vertical leader for the education learning management system (LMS) market, and are initiating INST at Overweight.

Meanwhile, for second quarter fiscal 2023, revenue is expected to be in the range of $128.5 million to $129.5 million, Non-GAAP operating income is expected to be in the range of $47.3 million to $48.3 million, Adjusted EBITDA is expected to be in the range of $48.5 million to $49.5 million and Non-GAAP net income is expected to be in the range of $26.0 million to $27.0 million.

For fiscal 2023, Non-GAAP net income is expected to be in the range of $110.9 million to $114.9 million and Adjusted Unlevered Free Cash Flow is expected to be in the range of $202.5 million to $206.5 million