Why did the IDP Education (ASX:IEL) rise by 20% in one month?

The IDP Education Ltd (ASX: IEL) share price has been a top performer on the ASX this month, rising up 20%. At the time of writing, the IDP Education share price is trading down 1.58% at $24.88, amid a broader fall in the ASX index. Let’s take a look at why the company has done so well in the past month.

What’s driving the IDP Education share price?

The English language education company has benefited from the news that the COVID-19 vaccine might soon be available to the general public. The company’s main revenue source mostly comes from in-person English language testing, and the vaccine news has raised hopes that international students might soon be back in Australia.

IDP Education qualified for JobKeeper, and in the year to 30 June, banked $4.5 million of that government subsidy. The company also reduced its employees’ salaries by 20% in the final quarter of FY20, saving it about $20 million. Those savings translated to an increase of 2.3% in net profit compared to FY19.

Broker upgrade

Earlier this month, broker Morgans upgraded IDP Education to an “Add” recommendation from a “Hold”. The broker said a COVID-19 vaccine would make it possible for international borders to reopen quicker than expected. This would bolster student placement and International English Language Testing System (IELTS) testing volumes – and hence earnings.

The broker also believes that IDP Education will be materially better placed when normalised conditions prevail, as the company has been successful in moving some of its businesses to the digital platform during the pandemic. Morgans raised its new target share price for IDP Education to $25.09, up from $23.31.

Potential risk for IDP Education

A recent study conducted by the IDP Connect International Student Crossroads Research concluded that international students overwhelmingly showed positive perceptions of countries that have remained open during the pandemic, and that many students are willing to change destinations to access face-to-face learning.

IDP Education chief executive Andrew Barkla commented on the finding, saying:

The research is a reminder that by failing to communicate support for students, Australia is at risk of damaging its reputation as a leading study destination.

We have confidence the sector can introduce travel corridors and quarantine programs that allow students to commence safely in Australia, which also enables the wider community to benefit from the many ways students enrich our towns and cities.

More about the IDP Education share price

The IDP Education share price has also done well for the year, up 44%. The share price is currently closing in on its 52-week high of $25.76. IDP Education shares were first floated on the ASX in 2015 at an initial public offering (IPO) price of $2.65. It was trading below $10 per share for most of the period prior to 2019.

At the current price of $24.88, the company commands a market cap of $7 billion. 

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Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd. 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.

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