Shares in Pearson PLC (LSE:PSON) fell 3.6% to 1,271 pence after JP Morgan ended a six-year run of backing the education group and cut its rating to 'neutral'.
The bank, which had held Pearson as one of its key picks for 2026, said the stock now offered only modest upside after a strong run.
Pearson shares have risen more than 20% this year, a rally JPM attributed to solid 2025 results, greater confidence in delivery and a warmer narrative on artificial intelligence.
Analyst Daniel Kerven said much of a wide discount tied to AI fears had now closed, leaving better value elsewhere.
He pointed to rivals RELX, Wolters Kluwer, Universal Music and Publicis as more attractive.
The concern that had weighed on Pearson was that AI could disrupt its textbooks and courseware.
The bank said Pearson had eased those fears by explaining that around 90% of its revenues come from operationally complex physical and digital workflows that are hard for AI to replicate.
Kerven argued AI could even help the company, by personalising learning and increasing demand for re-skilling, assessment and certification.
Crucially, the bank stressed it was not turning bearish.
It left its underlying forecasts unchanged and continues to expect growth to accelerate in the second half, from around 4% to roughly 6%.
That would keep Pearson on track for its medium-term guidance of mid-single-digit growth and margin expansion.
The downgrade is chiefly a valuation call.
Pearson now trades on around 16 times forecast 2027 earnings, and JPM nudged its December 2027 price target down to 1,420 pence from 1,430 pence.
The bank trimmed its 2027 earnings estimate by 1%, citing a stronger dollar, given that roughly 65% of Pearson's business is US-based.
Kerven said he would grow more positive on a valuation reset or evidence of a durable step-up in growth, potentially from an acceleration in the company's Enterprise Solutions arm.
