The Motley Fool

Top broker thinks the IDP Education share price is going a lot higher

When your business deals with international students, the closing of borders globally is never going to be a good thing.

This is what has happened to IDP Education Ltd (ASX: IEL) in 2020 and unsurprisingly has been reflected in its share price.

The IDP Education share price is down a disappointing 46% from its 52-week high.

Is this a buying opportunity?

While the short term will undoubtedly be tough for IDP Education, I believe this is priced in by the market now. In light of this and its very positive long term outlook, I feel this is a buying opportunity for investors.

I’m not the only one that would class it as a buy. According to a note out of Goldman Sachs, its analysts have retained their buy rating but cut the price target on the student placement and language testing company’s shares to $17.00. This compares to the current IDP Education share price of $13.43.

What did Goldman Sachs say?

Although it acknowledges that the next couple of years will be impacted by tough trading conditions in the core Australia and India markets, the broker remains very positive on its long term prospects.

It commented: “We now expect volumes across all of IEL’s key student placement markets to remain soft during 1H21E, and now only expect a recovery to commence from 2H21E. Whilst near-term uncertainty is likely to persist, we continue to see the longer-term structural growth profile of international education remaining robust.”

“Surveys on prospective students continue to suggest that plans to continue pursuing a higher level of education remains the case for the majority of students, and we expect this deferral of volumes to result in a build up of the student pipeline when markets reopen. We expect a sharp recovery in SP volume in FY22E, with a pick up in IELTS volume to lead student placement volumes,” the broker added.

In addition to this, Goldman believes that IDP Education will be in a strong position when conditions return to normal thanks to its strong balance sheet and access to capital markets.

It commented: “A strengthened balance sheet has allowed IEL to maintain its existing levels of capacity, particularly student placement agents, and we expect, that when international education markets fully reopen, this will place it in a favourable position to take a higher share of student placement volume vs. peers which may have had to reduce capacity during this period.”

I think Goldman Sachs is spot on and would be a buyer of IDP Education’s shares right now.

These 3 stocks could be the next big movers in 2020

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 6/8/2020

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.

Related Articles...