Pearson PLC (LON:PSON) has been upgraded to ‘equal weight’ from ‘underweight’ on valuation grounds by analysts at Barclays, however, the bank has warned about a potential impact on the educational publisher’s forecasts after the UK cancelled all of its GCSE and A-Level exams due to the coronavirus outbreak.
In a note on Monday, where the FTSE 100 firm’s price target was raised to 540p from 520p, Barclays assumed there will be “a very high drop-through of revenues lost from these assessment businesses” and reduced their earnings per share (EPS) forecasts for the group’s 2020 financial year by 24%.
The bank’s analysts added that there were also “structural pressures” on the firm’s higher education courseware business in North America, which they said could be “worse than expected”.
However, while the bank said “structural fears remain”, they upgraded the stock following a steep decline in Pearson’s share price, which has fallen around 49% since June 2018 when Barclay’s first rating the firm at ‘underweight’.
In lunchtime trading, the shares were 8.3% lower at 458p.