S&P/ASX 200 Index (ASX: XJO) stock IDP Education Ltd (ASX: IEL) looks to be putting a rough year behind it. Though the stock is joining the broader market retrace today.
In late morning trade on Friday, shares in the language testing and student placement provider are down 0.9%, changing hands for $6.54 apiece.
This puts the IDP share price down a painful 56.4% since this time last year. Though that doesn't include the 14 cents a share in partly franked dividends the ASX 200 stock paid out over the 12 months.
IDP shares have come under pressure as both its North American and Australian businesses were impacted by reductions in foreign student acceptance numbers amid broader national concerns over elevated immigration levels.
Over the past six weeks, however, IDP shares have come roaring back, spurred by the release of the company's FY 2025 results on 28 August. To put some numbers on that, since market close on 27 August, the IDP share price is up a whopping 44.1%.
Now, a lot of investors appear to believe that the rally is overdone. Indeed, the ASX 200 stock is the third most shorted on the market this week, with 13.2% of its shares held short.
But Tim Carleton, chief investment officer at Auscap Asset Management (whose fund holds shares in IDP Education), believes the short sellers have this one wrong (courtesy of The Australian Financial Review).
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Why the ASX 200 stock could keep rebounding higher
"IDP Education is a global leader in the provision of both English testing, through its IELTS business, and student placement services which assist those looking to study overseas," Carleton said.
"We are now seeing a normalisation of excess demand following the pandemic, exacerbated by strong anti-immigration sentiment globally," he added.
But the ASX 200 stock has been addressing this by implementing a range of cost-cutting measures.
According to Carleton:
The recent decline in student numbers for both businesses has had a dramatic impact on IDP's earnings. But they are looking to remedy this by removing a significant amount of cost that was added into the business during the period post pandemic.
Carleton is also optimistic that the recent caps on foreign student enrolments in the ASX 200 stock's core markets will ease in time.
"We think the negative sentiment towards students will likely dissipate over time and the demand profile will return to growth," he said.
Carleton concluded:
Education is a significant export for most of the markets they operate in, and universities around the world have become reasonably reliant on international student revenue to fund their research and other services.
The volatility in the last few years, and in particular the last six months, has given us an interesting opportunity to buy into the business at a price we think is very attractive.
