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Highlights
- IDP Education shares rose 3.1% to AU$14.38, marking a high since mid-October.
- Morningstar views the stock as undervalued, setting a long-term target price of AU$23.
- Analysts expect IDP to capture market share and recover as student volumes normalize.
Shares of Australian education consultancy firm IDP Education Ltd (ASX:IEL) surged by as much as 3.1% to AU$14.38 on Monday, reaching their highest level since 15 October 2024. The stock’s rise comes as brokerage firm Morningstar issued an optimistic outlook on IDP, viewing the current market valuation as “materially undervalued.” Despite IDP’s stock falling by over 30% this year, analysts remain confident in the company's potential to rebound as the student placement business recovers post-pandemic.
Brokerage Views on IDP Education’s Valuation and Potential
Morningstar’s recent analysis suggests that the market has been “overly concerned” with IDP’s core business of international student placements, possibly underestimating its long-term potential as student mobility resumes globally. According to Morningstar, IDP shares are significantly undervalued, with the brokerage setting a long-term price target of AU$23. This valuation is supported by anticipated improvements in IDP’s earnings once student volumes return to pre-pandemic levels, which Morningstar predicts will take place gradually.
Morningstar believes IDP’s established reputation and strong brand presence will help it capture greater market share as the education sector begins to recover. IDP specializes in counseling and placement services for individuals seeking international education, a sector poised to benefit from the easing of global travel restrictions and increased demand for overseas study opportunities.
Positioning for Long-Term Recovery and Market Growth
Morningstar's positive outlook for IDP is driven by the firm’s strategic position in a gradually recovering market. The brokerage expects IDP Education to outperform broader industry trends, especially as many students resume their plans for international education. While some analysts have concerns about short-term disruptions in the student placement industry, Morningstar emphasizes that IDP’s services are positioned to recover well, given its extensive network and established partnerships with universities worldwide.
Despite the challenges of the past year, Morningstar sees IDP’s brand strength and global presence as advantages that could enable it to capture additional market share, particularly as competing firms face similar industry-wide headwinds. IDP is expected to benefit from a resurgence in student mobility, as prospective students from around the world seek educational opportunities abroad.
IDP Education’s Stock Performance and Future Prospects
IDP Education’s shares have been under pressure, down 30.4% year-to-date, a decline attributed to investors’ caution around the pace of recovery in student placements. However, Monday’s share price surge reflects renewed investor interest driven by Morningstar’s forecast of long-term growth and recovery. Analysts suggest that as IDP Education’s student volumes normalize over the coming quarters, the company could reach the AU$23 valuation target, offering a significant upside from its current levels.
