(Sharecast News) - JPMorgan downgraded Pearson on Tuesday to 'neutral' from 'overweight' and cut the price target to 1,420p from 1,430p, saying its forecasts now only imply modest upside and it sees better value elsewhere.
The bank noted it has been OW the stock for the past six years and it was one of its key picks for 2026.

"However, our forecasts and price target, which are consistent with the company's guidance for mid-single-digit growth and margin expansion, now only imply modest upside, and we see better value elsewhere - notably Relx, Wolters Kluwer, UMG and Publicis," it said.

JPM said the share price performance this year has reflected strong FY25 results, increased confidence in the company's delivery and a more positive AI narrative.

"Confidence in the outlook has been supported by contract wins while a buyback, enabled by its strong balance sheet and good cash conversion, has provided technical support," it said. "A wide AI discount at the end of last year has partially closed as the company explained that 90% of revenues come from operationally complex physical and digital workflows, and print, which will be difficult for AI to disrupt.

"While Pearson should be resilient, there are also opportunities for AI efficiencies, for AI to help personalise learning experiences, and that more broadly, AI will increase the need for learning, re-skilling, assessment and certification."

JPM said its core thesis remains intact and it is not changing its underlying forecasts.

"We continue to expect an H2 acceleration in growth from circa 4% in H1 to c6% given the phasing of contract wins / losses that will allow Pearson to deliver on its mid-term guidance of mid-single digit growth and margin expansion in 2026," it said.

At 1124 BST, the shares were down 2.8% at 1,281.25p.

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