Informa PLC (LON:INF) has been downgraded to ‘neutral’ from ‘buy’ and had its target price lowered to 429p from 503p by analysts at Goldman Sachs as they revisited their view of the global education sector, saying the industry was “an attractive end market” and predicted spending will expand to US$18 trillion by 2030 from US$11 trillion in 2020.
In a note on Monday, the investment bank highlighted increased education spending in emerging markets and a “rise in mid-career upskilling/reskilling”. These developments are being supplemented by a transition to digital, which Goldman said is “establishing a range of new business models with double-digit revenue growth and compounding returns profiles”.
“Overall, businesses operating in the delivery of education (e.g. institutional operators and after-school tuition providers) are exposed to the largest addressable market; however, we see significant scope for growth in services to institutions and students (e.g. software solutions and accreditation), particularly amidst the shift to online, while educational materials providers are facing a transitional period”, the bank said.
Meanwhile, Goldman was more positive on Pearson PLC (LON:PSN), which it retained at ‘buy’ with a price target of 730p saying the saw the company as a “beneficiary of the significant opportunity for publishers with deep content repositories to re-purpose content for a more flexible, blended learning environment as well as expansion of the [online program management] market as Higher Ed institutions continue to shift online”. This was despite what Goldman expected to be a negative near-term trend for US higher education enrolment.
Goldman also maintained a ‘buy’ rating on Relx PLC (LON:REL), although its target price was trimmed to 1,962p from 2,015p.
The bank’s analysts said they expected higher demand for Relx’s existing technology tools and digital platforms as the shift towards online education continued, adding that while they were “cautious” on the near-term outlook for academic publishing given budget pressures on higher education caused by coronavirus, a shift towards online will see “potential for publishers’ revenues to grow at a higher rate, moving up in line with research volumes rather than with more constrained library budgets”.
“[We] believe large commercial publishers are set to benefit most as researchers remain focused on readership and journal prestige”, Goldman said.
Shares in Informa were flat at 395.3p in mid-morning trading, while Pearson rose 2.8% to 535.4p and Relx was up 1.6% to 1,721.5p.