Pearson Shares Rise Despite UBS Downgrade to Neutral on Valuation

UBS has downgraded Pearson (LON: PSON), the education and learning company, to Neutral from Buy on valuation. The investment bank left its 1,300p price target unchanged and pointed to a “less certain catalyst path” for the shares.

Pearson closed today at 1,266.5p, up 1.89%, or 23.5p, from yesterday’s 1,243p. The shares had already reached 1,290.5p by the middle of the morning, ahead of the note’s 11:38 time stamp. The close is 5.3% below the 52-week high of 1,337p set on the 29th of July.

UBS cited valuation for the downgrade and kept its target, so the call appears to rest on price rather than on any change in its view of the business. The 1,300p target is 2.65% above today’s close, a narrow gap that helps explain the move to Neutral.

UBS noted that the shares are up 18% so far this year. They hit a 52-week low of 874.8p on the 6th of February and closed today at 1,266.5p.

UBS joins other brokers in moving to Neutral since July. JP Morgan cut its rating on the 14th of July after six years at overweight, and Barclays followed on the 4th of August, citing balanced risk-reward at the current valuation.

Citi made the same move on the 2nd of September after a rally of about 40% from the February low. It raised its target to 1,345p from 1,300p, valuing the shares at 17.4 times 2026 earnings.

The business itself has not signalled a change. With first-half results on the 31st of July, Pearson’s full-year guidance is mid-single-digit underlying revenue growth and adjusted operating profit of £640m to £685m. First-half revenue rose 3.3% to £1.78bn, while pretax profit fell 6.0% to £205m.

For UK shareholders, the debate has moved from whether Pearson can recover to what the recovery is already worth. The next hard test is the nine-month trading update, due on the 22nd of October, two weeks today.