Pearson PLC (LSE:PSON) shares have been stuck in the doldrums, but UBS thinks the education group may be due a lift.
Its analysts reckon student enrolments in the United States this autumn could surprise on the upside, offering reassurance on a business often seen as hostage to college numbers.
The official guidance from Pearson is for flat enrolments. UBS’s own model concurs, pointing to pressures from a strong jobs market, high interest rates and comparisons with last year’s bumper 4.7% rise.
Add in administrative snags at America’s Department of Education, and the caution looks justified.
But three fresh datapoints suggest the gloom may be overdone.
First, 18 US universities that have already reported show enrolments up 7% year on year. Second, a UBS survey of more than 700 young adults points to a higher share in college than a year ago.
Third, federal student aid applications are up 14% so far in the current cycle.
UBS expects Pearson’s higher education unit to grow sales by 4% in the third quarter, helping the group to hit 3% organic growth after nine months and to reaffirm its full-year target of 4.4%.
A stronger fourth quarter should be driven by English language learning, assessment contracts and enterprise skills.
The bank keeps Pearson among its top picks, forecasting double-digit earnings growth in the medium term.
On about 14 to 15 times expected 2026 profits and with a 7% free cash flow yield, the shares look cheap against Dutch rival Wolters Kluwer, which trades on 19 times despite greater exposure to artificial intelligence risks.
UBS’s target price is 1,460p, implying nearly 40% upside from the current 1,054p.
Investors have been fretting over enrolments all year. If the early signs hold, Pearson could yet show that this is one anxiety too many.