Pearson Shares Gain Momentum as Citi Initiates Coverage with a Buy Rating

Pearson PLC shares (LON:PSON) are attracting renewed attention following the initiation of coverage by Citi analyst Ciaran Donnelly with a “Buy” rating and a price target of 1,300p. This vote of confidence arrives as markets navigate ongoing uncertainty surrounding the impact of artificial intelligence on various sectors, including media and education.

The firm's assessment has seemingly resonated with markets, influencing positive sentiment towards the stock, up 1.23% today. The analyst's note suggests that the previous AI-driven selloff may have been overdone, presenting an attractive risk/reward profile for Pearson at its current valuation.

Pearson, a global media group predominantly focused on education, has been undergoing a strategic transformation in recent years, emphasizing digital learning solutions and streamlining its operations. Its performance is closely tied to trends in educational spending, technological advancements in learning platforms, and the broader economic climate affecting educational institutions worldwide.

The target price of 1,300 GBp represents a noteworthy potential upside from recent trading levels, suggesting that Citi believes the stock is undervalued. The valuation likely considers Pearson's growth prospects in digital education, its cost-efficiency initiatives, and its resilience in a changing market landscape.

The “Buy” rating from Citi provides a fresh perspective on Pearson's potential, particularly as markets grapple with the implications of AI across industries. The firm's preference for stocks where AI-related selloffs appear excessive suggests a belief that the market may have overreacted to the potential disruption posed by AI in Pearson's core markets after a 15.5% decline over the past year.