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On Wednesday, UBS analysts upgraded IDP Education stock (IEL:AU) from a Neutral rating to Buy. The decision was accompanied by a revised price target, lowering it to AUD4.95 from AUD12.00.
The analysts noted that while some investors might prefer to wait for concrete improvements or cost-reduction measures, they see potential upside over the next 12 months compared to current market expectations. They highlighted two possible positive catalysts: the approval of the China IELTS government and a potential benefit from the Home Office English Language Test tender.
The analysts also pointed out that the company’s financial gearing does not appear to be at risk, with a projected net debt to EBITDA ratio of 1.8x for the second half of 2025, 1.4x for the calendar year 2025, and 1.2x for fiscal year 2026. They believe the valuation is not expensive, as IDP Education is trading at a forward price-to-earnings ratio of 19x for fiscal year 2026, while offering a three-year earnings per share compound annual growth rate of 20%.
In their commentary, the UBS analysts emphasized that despite the current depressed earnings and government policy cycle, the stock presents an attractive opportunity. They concluded by upgrading the stock to Buy with a 12-month view.
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