The share price of Idp Education Ltd (ASX: IEL) has hit fresh record highs this morning but the stock has more room to climb in the short-term if Morgan Stanley is to be believed.
The stock added 0.7% in early trade to $8.79 following last week’s announcement that the international student placement services group will replace takeover target Mantra Group Ltd (ASX: MTR) on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) from this Thursday.
That inclusion of IDP Education into the market benchmark is the basis for Morgan Stanley’ bullish call with the broker estimating that there is an 80% plus chance of the stock hitting further new record highs over the next 30 days.
“We estimate passive demand from index trackers which follow the [S&P/ASX] 200 to be circa A$42.3 million in value to trade with approximately 5 million shares traded,” said the broker, which has tagged the stock with an “outperform” recommendation.
This flood of fresh capital going into the stock is likely to push IDP Education closer to the broker’s price target of $9.65 a share.
IDP Education has already been running well ahead of the broader market as it’s seen as one of the best ways for investors to gain exposure to the booming international student market here, although the company also places students in educational institutions in other western countries like the United States and United Kingdom as well.
Strong demand for a western education from students in rising Asian economies like China helped lift IDP Education’s first half revenue by 29% to $242 million and earnings before interest, tax, depreciation and amortisation (EBITDA) by a third to $50.3 million.
The company looks well placed to continue benefiting from this thematic and the falling Australian dollar will also help.
In some respects, IDP Education shares common traits with Sydney Airport Holdings Pty Ltd (ASX: SYD), which is another stock that is benefiting from a boom in overseas demand for the Aussie experience.
The performance of IDP Education stands in contrast to its struggling peer Navitas Limited (ASX: NVT) with shares in the former surging 89% over the past year when Navitas is flat and the ASX 200 is up around 5%.
It isn’t only Morgan Stanley who is recommending investors buy the stock. Of the eight brokers covering the company (including Morgan Stanley), five have a “buy” recommendation on IDP Education.
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.