After a 28% Plunge, this Forward-Thinker Holds Even More Appeal
By Fri, Nov 13, 2020
As word spread in recent days about the prospects for a promising Covid-19 vaccine, you could hear a collective sigh as we started to envision a future where everything goes back to normal in our daily lives.
And while a sizable number of work-from-home employees will need to get ready for a permanent return to the office, many more will still be able to work from home—at least several days a week. IT (information technology) departments will have their hands full, ensuring that both on-site and off-site employees can access corporate networks, while keeping such networks safe from the prying eyes of hackers and cyberthieves.
The key is to ensure IT staffers have the skills and knowledge that keep them ahead of the curve when it comes to network management.
Such trends should play right into the hands of Pluralsight (PS). The Utah-based company has developed more than 7,000 learning modules, which can be deployed to give IT managers the confidence that team members are well-informed and making the right moves.
And we’re talking about this company right now for one simple reason. On November 6, its shares plunged 28% as investors over-reacted to quarterly results that were modestly impacted by customer purchase decision delays related to Covid-19. Sales and profits came in ahead of forecasts, but an 8% growth rate in client billings was less than expected as a few deals slipped to the fourth quarter. That pullback creates a fresh opening for a stock in a company that, in fact, has a remarkably bright future, long after the pandemic wanes.
As analysts at BTIG have noted, “The pace of innovation around key enterprise tech shows no signs of slowing nor does the broadening demand for knowledge workers to develop, implement, and maintain so many software platforms, complex network infrastructure, and maximize the useful life of major hardware investments of the past.” They added that, “Providing the learning platform to advance the skill sets of current employees is far more efficient and effective than hiring outside experts and should drive sustained growth (for Pluralsight) for several years to come.”
When I look at tech firms, I like to assess what is known as the total addressable market (TAM). This metric gives an idea about just how large a firm can potentially grow. Pluralsight has sized up the various IT markets its products serve and has determined that a hefty $42 billion in various segments could be maximally captured. A realistic 10% market share across its segments implies eventual annual sales of $4.2 billion. For context, Pluralsight had $100 million in sales in 2015, $317 million in sales last year, and by next year, sales will likely still have only reached around $450 million.
To be sure, well-trained IT staffs aren’t just a concern here in the United States. Globally, firms have to manage a welter of hardware and software set-ups, providing both on-site and remote access to networks in a secure manner. Pluralsight has clients in more than 180 countries and sees international revenues as a major growth driver for its sales team. Foreign sales grew 40% in 2019.
This firm breaks down its various software and service modules into two key platforms.
Pluralsight Skills helps managers assess a staffer’s skills and roles, with a course library, directed learning paths, and business analytics tools. For example, Skill IQ and Role IQ help benchmark technical proficiency against what is required to succeed in a specific technology role or team, such as software development, IT operations or security
Pluralsight Flow ties together historical data to provide insights and reports to software developers and technology leaders. Key metrics help visualize the progress of a key IT project and can track it through the project’s lifecycle.
One early indicator of Pluralsight’s future growth is the attendance at its virtual annual user conference. In 2019, there were 3,000 attendees. This year, the figure exploded to 29,000. CEO Aaron Skonnard said in an early November call with investors that, “We don’t know yet how the higher participation and pipeline will translate into billing. But we are encouraged by the significant numbers and enthusiasm from customers attending this year’s event.”
To augment its growth, Pluralsight has been making smart acquisitions. For example, last month, it bought DevelopIntelligence, a leader in developing skills development tools and IT staff onboarding. The acquired firm also provides strategic skills-consulting for enterprise tech teams.
I always enjoy the chance to buy into a fast-growing disruptive tech firm while shares have been temporarily placed in the penalty box.
Action to Take: Consider buying shares of PS up to $19 and sell when they reach $30. Pluralsight today closed at $15.86.
SPONSORSHIP
Silicon Valley Visionary: “This Will Be the No. 1 Tech Stock of 2020.”
Jeff Brown is a tech investor known for his incredible success rate.
In fact, he’s invested in 111 different tech startups… and made money on 95.3% of them.
Like Intabio, which developed a groundbreaking system to test biopharmaceuticals.
Jeff’s stake is up 900%.
Or ShapeShift, which Jeff got into very early…
As of today, he estimates his investment is up 25,000%.
He made 743% in three days on InfoSpace!
And now, he’s just released the details on his number one tech stock for 2020.
Click here to watch this valuable presentation.
About the Author
Contributor David Sterman is a certified financial planner and has worked as a financial journalist and investment analyst for more than 25 years.
