Morgan Stanley analyst Toni Kaplan has maintained an Overweight rating on McGraw Hill while lowering the price target to $18 from $21. The revised target indicates a recalibrated valuation outlook for the company's shares.

The decision to lower the price target comes as the firm assesses McGraw Hill's current market position and future performance potential. Despite the reduction in the target price, the Overweight rating suggests that the stock is still expected to outperform relative to its sector peers.

Rating and Price Target Details

The following table outlines the revised ratings and price targets provided by Morgan Stanley:

The adjustment in the price target highlights the firm's updated analysis, while the continued Overweight stance signals confidence in the company's fundamental strength.

McGraw Hill reported fiscal year 2026 revenue of $2.1 billion, exceeding IPO expectations, with recurring revenue growing 6% to represent over 73% of total revenue. The company launched eight AI learning tools serving over 7.5 million users and announced plans for three additional tools. For fiscal year 2027, McGraw Hill expects revenue between $2.115 billion and $2.175 billion, with adjusted EBITDA guidance set to grow to a range of $750 million to $790 million. The company reduced gross debt by $646 million in fiscal year 2026 and announced a $50 million share repurchase plan.

Fourth-quarter revenue was $464 million, down 2% year-over-year, reflecting a smaller K12 market opportunity partially offset by continued outperformance in higher education. Recurring revenue totaled $373 million while digital revenue reached $393 million, representing 81% and 85% of total revenue respectively. Fiscal year adjusted EBITDA was $744 million, up 2% year-over-year, with margin expanding nearly 80 basis points to 35.4%. The company highlighted significant investments in literacy curriculum, viewing the science of reading as a major growth area.

Financial Highlights

Strategic Developments

Management emphasized the strategic use of AI in education, noting the development of agentic AI tools and partnerships aimed at expanding McGraw Hill's reach beyond traditional education markets. The company is piloting a new agentic AI tool to make its precision education experience accessible as a trusted AI agent. In higher education, fiscal year revenue grew 12% year-over-year to $879 million, driven by market share gains approaching 31%.

Challenges in the K12 market were noted, particularly with the slower-than-anticipated adoption of the California math curriculum, though long-term opportunities in literacy were emphasized. The company has invested over $100 million in its new Science of Reading ELA program, Emerge, Summit and Soar. McGraw Hill remains focused on achieving a net leverage target of two to two and a half times.