IDP Education shares rebound as analysts retain rating
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The news: IDP Education shares gained in early trading, after the education services company closed as the worst performer across the ASX 200 on Thursday, having announced workforce cuts due to a contracting international student market.
The numbers: IDP shares were up 4% to $15.10 by midday AEST, having closed 7.08% lower on Thursday.
Macquarie analysts retained their 'neutral' rating on the stock, but reduced their price target by 27% from $22 to $16.
They also reduced their earnings per share estimates by 18% in FY24, 38% in FY25 and 42% in FY26, reflecting IDP's guided 20% to 25% decline in student placements into FY25.
The context: The analysts noted that consensus estimates have historically given IDP reasonably optimistic market share gains and market expansion.
However, following Thursday's trading update — in which IDP announced it would cut 6% of its global workforce in response to stricter visa laws driving a reduction in the international student market — the analysts said they saw further downside risk to FY25 earnings expectations, mainly around student placement volumes and the consequent operating deleverage.
They said that further consensus downgrades are likely to weigh on IDP's share price in the near term.
However, the analysts believed there were "several factors" that would benefit IDP over the next three years, with upcoming UK and Australian elections likely to provide a pathway to reducing regulatory pressure on student visas.
Likewise, EBIT declines in FY25 caused by softer student volumes were expected to be partly offset by lower costs.
The source: Macquarie research
