The last year was a real nightmare for him FTSE100 warehouse Pearson (LSE:PSON). The publishing giant’s value has fallen by 33% due to market pressures, major contract losses and fears that artificial intelligence (AI) will take over its business.

But could Pearson’s share price rise significantly in 2026? If City’s forecasts prove right, this could well happen – 11 analysts have set an average 12-month price target for the company of £12.07. This represents an boost of 34% compared to current prices.

However, I’m not convinced. Here I’ll explain why I avoid Pearson stock like the plague.

No worthwhile shares

Market panics often lead to unfair selling of some of the highest quality stocks. Buying them out can be a huge benefit to buyers because (in theory) they can deliver huge profits when investors wake up and re-value the stock.

The problem is that for me, Pearson doesn’t fit into that category. First of all, it doesn’t look particularly low-cost. At 904.2p per share, the publisher trades at 13.8 times forward price-to-earnings (P/E).

True, that’s lower than the 10-year average of about 16 times. But in my opinion, this doesn’t fall into “bargain basement” territory. It also leaves no significant room for price recovery.

In fact, given the huge challenges it faces, I believe the company could – and even should – trade much cheaper.

AI threat

Since its founding in 1844, Pearson has done many things, including drilling for oil and producing porcelain. However, in the 1990s it focused solely on the education sector, becoming one of the world’s largest suppliers of textbooks and tests to schools, colleges and universities.

However, this now poses a huge problem because it puts the company at risk of being destroyed by AI. Accuracy problems continue to plague these up-to-date technologies, but rapid progress poses grave risks. They also offer opportunities that standard textbooks and the like do not, such as the ability to create interactive experiences for students.

Pearson isn’t sitting on its hands and developing its own set of AI tools to turn this situation into an opportunity. It’s having some success here, with sales at its Virtual Learning unit up 20% in the fourth quarter. This part of the business is increasingly using digital improvements and artificial intelligence.

To sum up, I believe that artificial intelligence poses more threats than opportunities in the long run. Last year, American rival Pearson Chegg laid off 45% of its workforce because, as it put it, “up-to-date realities of artificial intelligence“

High risk, high reward?

Unfortunately for FTSE, the rapid development and adoption of artificial intelligence is not the only threat to future profits. Pearson operates in a highly competitive industry, and its shares fell last year after losing a major contract to evaluate American students in New Jersey. Similar failures are an ever-present threat.

Another major threat is the pressure on education budgets in all markets. Faced with strained public finances and rising costs, governments are likely to cut spending on educational materials.

Pearson AI’s early success may tempt some investors after recent share price weakness. But I won’t be adding the FTSE company to my portfolio now.