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.
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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."
