Bank of America said Pearson’s stock didn’t deserve the same blow as Chegg’s, despite the growing threat of artificial intelligence in the education technology sector. Analyst David Amira doubled down on edtech stocks to buy out of poor performance. He has raised his price target from £885 to £895, suggesting an 18.7 per cent gain to Tuesday’s close. “Reading to Pearson feels too harsh,” he said in a note to clients on Wednesday. We think it’s attractive.” The London-based analyst upgraded UK stocks. US investors can buy shares through his ADR, which trades under the ticker PSO. The US-listed stock is up more than 9% in pre-market trading after he fell 14.6% on Tuesday. The stock has fallen about 17% since the beginning of the year. Amira said the company was “relatively confident” in its first-quarter update, notably his 6% organic growth, and his 3x year-over-year increase in subscribers on the Pearson+ platform. , and pointed out share buybacks. The update comes within days of his Chegg’s first-quarter report, prompting the sale on Tuesday after Chagg’s management announced his ChatGPT was hurting the business. But she said Amira, Pearson said he was on a different boat than Chegg. Because Chegg focuses on homework help and Pearson focuses on textbooks, customers have different reasons for using them. He also noted that Pearson has made positive comments about admission expectations. He said use can have different effects. However, the analyst noted that AI could make it easier to create open educational resources, thereby reducing the need for students to go through Pearson. Amira said the risk-reward ratio looks more attractive after the plunge. Similar to Chegg’s consensus estimate, he explained that even if earnings related to higher education fell by 20%, the price-to-earnings ratio should not underperform peers in the media sector. Amira reiterated his neutral assessment of Chegg in the memo, but lowered the price target from his $20 to his $11. His target means he’ll be up 21.1% from the share price that ended Tuesday. However, the target is still 37.5% off the price that ended Monday’s session, showing the impact of Tuesday’s sell-off on the stock. PSO CHGG 5D Mountain US Listed Stocks Pearson vs. Chegg — CNBC’s Michael Bloom contributed to this report.
