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On Monday, Instructure, Inc. (NYSE:INST) experienced a change in stock rating from Truist Securities. The firm downgraded the company's stock from Buy to Hold, adjusting the price target to $23.60, down from the previous $35.00. This decision follows the recent development of KKR's definitive agreement to acquire Instructure in an all-cash transaction.
The acquisition by KKR values Instructure at $23.60 per share, which translates into a total transaction value of $4.8 billion. In light of this agreement, Truist Securities has aligned the new price target with the offer price. The downgrade is based on the assumption that the offer from KKR will be the ultimate and final bid for the company, with no expectation of competing offers emerging.
Truist Securities' revised price target reflects the terms of the acquisition agreement, indicating that the analyst does not foresee a higher bid for Instructure. The firm's commentary suggests that the current offer is the best anticipated outcome for Instructure's shareholders.
The all-cash deal proposed by KKR is significant for Instructure, as it marks a pivotal moment in the company's market presence. By setting the price target equal to the offer price, Truist Securities acknowledges the implications of the acquisition on Instructure's stock value.
Instructure's stock adjustment on Monday is a direct consequence of the acquisition news, with Truist Securities' revised rating and price target providing current shareholders with the latest valuation guidance based on the terms of the agreement with KKR.
In other recent news, the private equity firm's offer to purchase Instructure at a share price of $23.60 has prompted Citi to downgrade its rating on the company's shares from Buy to Neutral. Meanwhile, Jefferies has also downgraded Instructure's shares from "Buy" to "Hold", setting a new price target to match the acquisition price.
Instructure's first-quarter revenues have reported a 20.7% year-over-year increase to $155.5 million, leading the company to raise its fiscal year 2024 revenue outlook to a range of $656.5 million to $666.5 million. This growth is primarily driven by a significant 22.1% rise in subscription and support revenue.
The acquisition, which is expected to close later this year, will result in Instructure becoming privately held and its common stock delisted from the New York Stock Exchange. The company's current majority owner, Thoma Bravo, is expected to approve the transaction.
These recent developments reflect the ongoing changes in Instructure's market situation.
InvestingPro Insights
As Instructure, Inc. (NYSE:INST) navigates through its acquisition by KKR, investors and analysts are closely monitoring its financial metrics and market performance. According to InvestingPro data, Instructure holds a market cap of approximately $3.42 billion and has seen a revenue growth of 13.5% over the last twelve months as of Q1 2024. Despite a challenging valuation landscape, as indicated by a negative P/E ratio of -77.93, the company has a robust gross profit margin of 65.93%.
From an investment standpoint, InvestingPro Tips highlight that analysts have revised their earnings expectations upwards for the upcoming period, signaling confidence in the company's potential to grow its net income. Additionally, Instructure has demonstrated a strong return over the last three months, with a price total return of 19.96%. However, it's important to note that the company's short-term obligations currently exceed its liquid assets and it has not been profitable over the last twelve months. Investors considering the stock should weigh these factors against the backdrop of the impending acquisition.
For a deeper dive into Instructure's financial health and future prospects, investors can explore additional insights and tips available on InvestingPro. There are 7 more InvestingPro Tips for Instructure that can be accessed for a more comprehensive analysis. To enhance your investing strategy, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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