Shares round-up: Pearson at 9-year high as YouGov rockets 16%
In decline even before Covid, this FTSE 100 education company has staged an amazing comeback. And this AIM-listed polling and data business will hope it can do the same.
29th October 2024 15:43
by Graeme Evans from interactive investor
The potential of generative AI today underpinned a nine-year high for Pearson (LSE:PSON) shares and boosted hopes that fellow media stock YouGov (LSE:YOU) is on the road to recovery.
FTSE 100-listed Pearson added another 35.5p to 1,107p after the coursework and virtual learning business posted 5% underlying sales growth for the third quarter.
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Pearson told investors it has started to see the commercial benefit of its advances in artificial intelligence (AI), including double-digit year-on-year growth in billings for Higher Education products with AI study tools.
It has also enhanced its English Language learning division through the development of Teaching Pal, an AI-powered product designed to simplify educators' work.
Chief executive Omar Abbosh identified AI as one of three strategic objectives at the start of this year, alongside expansion into workforce learning and focus on operational performance.
He said the company was delivering on these priorities as all divisions showed improvement in the third quarter, including through a return to growth in Higher Education.
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Abbosh, who reiterated guidance for the full year, also highlighted the relationships with companies such as ServiceNow as it looks to build its position in workforce learning.
Shore Capital reiterated its Buy recommendation following today’s update, adding that it continues to regard Pearson as a core holding at the large-cap end of the Media sector.
Based on forecasts for three-year aggregate growth in earnings and dividends per share of 18% and 21% respectively, the City firm said headline valuation metrics showed the potential for further share price upside.
In contrast to Pearson, the shares of research data and analytics firm YouGov have recently languished at levels last seen during the early days of the pandemic.
Its low point followed a profit warning in June, when the AIM-listed company highlighted the impact of shrinking corporate budgets and economic uncertainty on its data products division.
As part of its wider turnaround strategy, the company has been building its AI-enabled capabilities in an effort to enhance its product offer and operational efficiency.
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This included the summer acquisition of New Zealand-based Yabble, which has developed generative AI-powered tools specifically for the research industry since 2019.
Today’s results for the year to 31 July showed a 21% fall in adjusted profits to £45 million but YouGov shares jumped 59.7p to 457.7p after the company reiterated 2024-25 expectations.
Sales bookings momentum is expected to pick up in the second and third quarters as the company heads into renewal season for its data products, supported by the launch of new products and features as well as an improvement in market conditions.
Chief executive Steve Hatch said: “We acted quickly over the summer and I am confident that we have put the right initiatives in place as we focus on the execution of our long-term strategic plan.
“Our clients continue to value the quality of our products and services, this is reflected by our high renewal rates and strong customer relationships.”
Peel Hunt reiterated its 720p target price following today’s results while Berenberg values the shares at 810p.
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