Pinned straw:
Adding to the UBS share price target of $25.30 shared by @Jimmy today, I’ve included consensus views from 15 analysts supplied by Simply Wall Street. Share price targets have been tracked against the current share price for the last 2 years in the chart below.
Source: Simply Wall Street
The first thing that strikes me about this chart is how the 12 month price target follows the share price down. It doesn’t give you a lot of confidence in the target if the share price tracks down even further.
The other concern is the low level of agreement amongst analysts on the 12 month share price target with a dispersion of 15%. The highest price target is $29.47 and the lowest is $17.00. The consensus share price target is $23.84.
If the most bearish of the 15 analysts turned out to be correct and we bought IDP Education shares today at 3 year lows of $17.18, we would be down 1% in 12 months time. If we included 40 cps in dividends (77% franked, 53 cps gross), we would be up 2% on our investment in 12 months time. That’s not a great outcome, but if that’s the down side I’d be happy to cop that.
If the upside is analyst consensus of $23.84 we could be up over 40% in 12 months time, including the dividends.
Of course all 15 analysts could turn out to be wrong, and the shorters might be correct. During the COVID 19 pandemic IDP Education fell to a low of $10.89, so it’s possible for the share price to fall even further.
However, all these opinions are based on a 12 month horizon, and I’m more interested in how IDP Education will be performing in 2 to 3 years from now.
Source: Simply Wall Street
Interesting to see that this one has some analysts representing multiple companies and some companies with multiple analysts.
Maybe another place to check is the options market … might be able to give you some view of what a bit more of the market is thinking. IV looks to be coming down which should indicate that the market getting a bit more bullish. However, relatively speaking IV is still quite high compared with some of the more traditional “blue chips” (eg. COL, ANZ, CBA, WES which are all in the high teens). Level of IV also justifies the breadth of range from the analysts as well.
If there was a degree of uncertainty, you could sell a covered call at $19.5, lock in about 10% gain now and maybe get another 10% by the end of the calendar year (or buy now, sell at the money call and take about 15% up front). Of course, with that strategy you don’t get to participate in as much upside as if the analysts consensus is closer to what actually happens and selling in < 365>
The other thing I’d want to check is how recent the majority of those estimates from Analysts were published … the share price has dropped quite a bit in the last month so perhaps some of those estimates are out of date. Looking at the news, only UBS and Goldman have released new estimates in the last month … they are both down but still above the analyst average.
DISC: Not held but having a look at whether there is opportunity here.