Why the G8 Education share price is sinking lower today

The G8 Education Ltd (ASX:GEM) share price has sunk lower on Tuesday. Here's why…

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The G8 Education Ltd (ASX: GEM) share price has been amongst the worst performers on the S&P/ASX 200 index this morning.

At the time of writing the childcare centre operator's shares are down a sizeable 4.5% to $3.15.

Why is the G8 Education share price tumbling lower today?

With no news out of the company, today's decline appears to be related to a reasonably bearish broker note out of Deutsche Bank this morning.

According to the note, the broker has downgraded the company's shares to a sell rating from hold. Deutsche has a price target of $2.70 on G8 Education's shares, implying potential downside of over 14% even after today's decline.

Deutsche's analysts downgraded G8 Education's shares due to concerns that it could be underperforming the rest of the industry and experiencing weaker than expected occupancy levels.

Not everyone is bearish on G8 Education, though. A note out of UBS this morning has declared the childcare centre operator's shares a buy with a $3.80 price target.

This price target implies potential upside of almost 21% for its shares over the next 12 months excluding dividends.

According to that note, analysts at UBS believe there is upside risk to its earnings from occupancy improvements and price increases.

Should you invest?

With both brokers offering very different opinions on the prospects of G8 Education, I intend to err on the side of caution and stay clear of its shares for the time being and let its results do the talking later this year.

For now, I think IDP Education Ltd (ASX: IEL) shares might be a better option for investors looking for exposure to the education sector. Though, due to its premium valuation, I would only recommend you buy shares in IDP Education if you're prepared to make a long term investment.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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