The IDP Education Ltd (ASX: IEL) share price is down 4% and initially dropped 10%, after releasing a disappointing update.
This business generates a large amount of its revenue from student placement and English language testing.
Weak IDP Education update
The company said a more restrictive policy environment in IDP’s key destination countries of Australia, the UK and Canada is reducing the size of the international student market.
This dynamic has negatively impacted the company’s English language testing and student placement volumes during the second half of FY24.
In FY24, IDP is expecting a 15% to 20% increase in student placement volumes, a 15% to 20% decline in English language testing volumes and “solid” average fee growth compared to FY23.
The company is now expecting its adjusted EBIT (EBIT explained) for FY24 to be “broadly in line” with FY23, meaning its profitability could be flat.
Outlook is poor for the sector
IDP Education said given the current policy settings and market trends, it expects the size of the international education market will “decline by 20%-25% over the next twelve months”.
In response to that, the company is implementing a cost-reduction program that is “designed to align expenses to the near-term revenue outlook”.
IDP says it’s the leading quality player in the sector and it’s “very well placed” to help students and institutions navigate the challenging market conditions and expects to grow its market share in student placement.
Despite the headwinds in the short-term, IDP is “confident in the long-term growth drivers for the industry.”
Is the IDP Education share price a buy?
The ASX share says it’s “strongly leveraged to the powerful long-term macro forces that will underpin the sector’s return to sustainable growth and is executing on a strategy to create a unique offering for students seeking a better life through international education.”
Sometimes it can be worthwhile to look at a beaten-up share as a turnaround opportunity. The dynamic with governments limiting students is hard to predict, but I would imagine the limits will be taken off sometime in the future, which could help IDP Education.
There are other ASX growth shares that could be better investments where there’s less uncertainty caused by a government decision, but this may be one to watch.
