Stock of the day: is now the time to sell IDP Education?

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Stock of the day: IDP Education (ASX: IEL)

IDP Education's market challenges

IDP Education (ASX: IEL) has warned that the Australian government's proposed changes to immigration policies are expected to cause a 20-25% decline in the international education market over the next 12 months. The more restrictive policy environment in IDP's key destination countries is reducing the size of the international student market, impacting its testing and student placement volumes.

Despite these challenges, IDP still expects FY24 earnings to be broadly in line with last year's results. However, the company is currently the second most shorted stock, and its share price is down around 4.5% following the update.

Analysts' perspective

Analysts who previously held IDP Education in high regard due to its strong market position and monopolistic testing advantage have now changed their stance. The announcement by the Canadian government to introduce a more flexible approach to testing away from the British Council standard, which IDP had a share of, triggered some analysts to sell their positions. The lack of rental supply and high rental prices are driving politicians to cut student numbers in inner cities, particularly in Australia, creating a challenging environment for IDP Education.

Analysts believe that until there's a solution to this issue, it's difficult to see how student numbers will not be cut, which would have a significant impact on the company. They recommend selling IDP Education shares, as the political winds are not in favour of the company, and there is potential for further sell-offs. While there may be a time to buy the stock in the future when the political situation changes, analysts currently see the bigger picture as unfavourable for IDP Education.