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Short Sellers Learning That Narrow-Moat Pearson May Not Be an Easy Target After All

Michael Field, CFA Senior Equity Analyst

Analyst Note

| Michael Field, CFA |

Narrow-moat Pearson's shareholders have enjoyed a rather pleasant week or so, with the share price rallying as much as 30%. Last week's fourth-quarter results displayed a resilient performance through the pandemic, with organic revenue falling just 10% from full-year 2020. This was despite massive disruption throughout the business and a quickening of trends such as the migration away from higher education textbooks, once a cash cow for the business. Following that, we had the knock-on effect from the Reddit/Game Stop debacle. With short sellers of high-profile stocks now on edge, Pearson, which had a short interest of 15% of the free float, was an obvious candidate for a swift, pre-emptive exit. Although the share price currently stands above our GBX 780 fair value estimate, we are not convinced that the short sellers are gone for good.

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Company Profile

Business Description

U.K.-listed Pearson is the world’s largest educational provider. The company has been disposing of noncore businesses such as the Financial Times, The Economist, and publishing house Penguin, and is now focused on being an educational resource and testing provider. While Pearson’s primary activity centres on higher-level education, the firm also has significant operations in providing clinical assessments, professional certification and testing.

80 Strand
London, WC2R 0RL, United Kingdom
T +44 2070102000
Sector Communication Services
Industry Publishing
Most Recent Earnings Dec 31, 2008
Fiscal Year End Dec 31, 2020
Stock Type
Employees 22,500