IDP Education (ASX:IEL) share price higher on bullish broker note

This leading broker is feeling bullish about IDP Education…

| More on:
IAG share price broker upgrade buy

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The IDP Education Ltd (ASX: IEL) share price is on the move on Thursday morning.

At the time of writing, the language testing and student placement company's shares are up 1% to $29.61.

This means the IDP Education share price is now up over 30% in the space of a month.

Why is the IDP Education share price rising?

The catalyst for the rise in the IDP Education share price on Thursday appears to be a bullish broker note out of Goldman Sachs.

According to the note, the has reiterated its buy rating and lifted its price target on its shares to $35.00.

Based on the latest IDP Education share price, this implies potential upside of 18% even after today's gains.

What did Goldman say?

Goldman Sachs has updated its earnings estimates to reflect the acquisition of the British Council's Indian IELTS operations and recent COVID-19 disruptions. While the latter has led to lower short term earnings expectations, its long term estimates have increased.

The broker explained: "We have cut our 4Q21 expectations for IELTS testing volumes in India and FY22 SP [student placement] volumes for Australia reflecting COVID disruptions and border closures. This results in EPS changes for IEL in FY21/FY22/FY23 of -7.1%/-7.5%/+8.4%."

"Despite near-term earnings disruption, we are confident in the eventual bounce-back to pre-COVID trend growth, supported by strong structural growth in international student demand. We think the market is likely to look through near-term COVID disruptions and instead focus on the long-term outlook for the business," it added.

Acquisitions to drive future growth?

But perhaps the main reason Goldman Sachs believes the IDP Education share price is good value right now is the prospect of further earnings accretive acquisitions in the future.

Goldman commented: "In our view, the acquisition of BC's Indian IELTS operations is an indication of IEL's willingness to deploy capital toward synergistic acquisitions, and may pave the way for further transactions in other countries. While we take no view on any specific transactions, we move our target price methodology to DCF and apply an uplift of A$3.20 to our DCF to capture the potential value from further acquisitions. Our new 12-month TP is A$35.00; with this offering 20% upside, we reiterate our Buy rating."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Idp Education Pty Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A businessman stacks building blocks.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares hit a new record high today.

Read more »

A man sees some good news on his phone and gives a little cheer.
Share Gainers

Why Auckland Airport, Australian Ethical, Breville, and Clarity shares are charging higher

These shares are having a better day than most on Thursday. But why?

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Share Fallers

Why 29Metals, CAR Group, DroneShield, and Santana Minerals shares are falling today

These shares are missing out on the good times on Thursday. But why?

Read more »

Cheerful businessman with a mining hat on the table sitting back with his arms behind his head while looking at his laptop's screen.
Broker Notes

Macquarie tips 50% upside for this ASX 200 miner, and it's not BHP!

Unheralded miner poised to surge?

Read more »

A woman sits at a table with notebook on lap and pen in hand as she gazes off to the side with the pen resting on the side of her face as though she is thinking and contemplating while a glass of orange juice and a pair of red sunglasses rests on the table beside her.
Share Market News

Will these ASX 100 shares surge or sink in July?

These are two ASX favourites to watch closely this month. 

Read more »

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Share Market News

3 ASX ETFs for smart investors

Let's see what makes these funds top picks for Aussie investors.

Read more »

A woman sits on sofa pondering a question.
Broker Notes

Guess which ASX All Ords media stock Macquarie expects to rise 17% over the next 12 months?

The broker is expecting big things from this media company.

Read more »

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Share Market News

5 things to watch on the ASX 200 on Thursday

It looks set to be a good session for Aussie investors on Thursday.

Read more »