IDP Education shares bounce as analysts see long-term recovery
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The news: IDP Education bounced back from a near 50% sell off on Tuesday, climbing as high as 8% after analysts upgraded the education services provider due to its depleted share price.
The numbers: IDP shares were up 5.4% to $4.09 at midday AEST after tumbling 48% on Tuesday following heavy downgrades to the company's full-year guidance.
UBS upgraded IDP from 'neutral' to 'buy' but slashed its price target from $12 to $4.95. Macquarie retained its 'outperform' rating and lifted its target price from $16 to $16.40. Morgans downgraded its rating from 'buy' to 'hold' and cut its target price from $13 to $4.15.
The context: UBS analysts said that IDP "remains a high quality business", albeit one operating in challenging conditions. They noted that while uncertainty remains, the current operating environment is close to "trough conditions".
The analysts forecast a "conservative recovery" in FY27 and FY28, allowing for minor market growth or market share gains, as well as earnings upside should market conditions improve.
Likewise, Macquarie analysts said that IDP can deliver double-digit growth over the long term. While current trading is impacted by negative rhetoric and anti-student immigration policy settings in key markets, cost cuts and improved sentiment are key re-rating catalysts.
Despite issuing a downgrade for the stock, Morgans also noted IDP's competitive advantage over the longer term, with market share opportunity in its student placement business.
What they said: "We recognise some investors will prefer to wait for tangible signs of improving conditions or traction on cost-out initiatives, but on a 12 month view we see upside vs current implied expectations," UBS analysts said.
The sources: UBS research, Macquarie research, Morgans research
