The investment bank said education is “likely the most important investment” in an increasingly intellectual economy, with global spending amounting to US$5 trillion in 2019., however the sector is significantly under-represented in the capital market.
As advances in governmental policy, technology, and business models are redefining the education value chain, and COVID-19 is spurring the 1.5bn children’s adaptation to online learning, analysts believe a new education era is coming of age.
Like in many other industries, COVID-19 is likely to have accelerated a shift that comes as a shock to the system.
In fact, online education could overcome the scalability and affordability challenges that traditional, offline institutions are facing, as well as meeting rising demand for lifelong learning in an ever-changing job market.
UBS reckons non-formal education to build up critical mass online, with more to-customers models, and reach US$213bn in 2025, although it only accounted for 9% of the global education spending last year.
Formal education, which makes up the lion’s share, public/not-for-profit formal education institutions are expected to adapt to learners’ changing preferences by providing partial/fully online programmes.
Overall, online education is forecast to add a US$94bn new revenue opportunity to the value chain, most notably in advertising, cloud services, data centres, hardware, and software.
“Formal education will likely continue growing, despite the rise of informal alternatives. That said, we think the transition to remote study will likely accelerate driven by new technologies, business models and demand for better value for money,” analysts commented.
“We believe Pearson is well-positioned to take advantage of these trends.”
Shares rose 2% to 673.6p on Thursday at noon, above UBS’s target price of 650p.