Morningstar analysts are holding to their “long-term recovery thesis” on IDP Education Ltd, despite the stock suffering its worst trading day on record following a sharp earnings downgrade.
Shares in the international student placement and language-testing provider plunged 45% to close at A$4.12 on Tuesday – and briefly touched an eight-year low of A$3.88 – after the company warned of further pressure on earnings into financial year 2026.
Morningstar’s Shane Ponraj said student caps were “transitory” and policy-driven, pointing instead to structural demand drivers such as ageing populations in key study destinations and increasing demand from emerging markets. Nevertheless, he revised the group’s FY25 earnings before interest and tax (EBIT) forecast to A$115 million, down from A$150 million.
Short sellers have ramped up pressure on the company, with short interest rising sharply from 5% in January 2023 to a peak of 17% in May 2024, before easing back to around 11%.
Downgraded guidance
IDP has lowered its full-year earnings guidance to a range of A$115–125 million, down from A$239 million in FY24. Student placement volumes are expected to decline by 28–30%, with its high-margin English language testing business to drop by 18–20%.
The company cited tightening policy in major destination markets – the United States, the United Kingdom, Australia and Canada – as a key driver of the expected decline.
Broker response
The earnings shock has prompted two broker downgrades so far. Morgan Stanley downgraded IDP to Equalweight for the first time in at least two years and slashed its target price 76% to A$4.25. CLSA has also moved to Equalweight from Accumulate, cutting its target price 63% to A$4.00.
Macquarie retained its Outperform rating but reduced its price target by 60% to A$6.40.
Bloomberg’s 12-month consensus price target has fallen from A$14.57 to A$7.87 – still implying over 100% upside, but contingent on a marked turnaround.