Bank of America Merrill Lynch upped its price target on educational publisher Pearson and reiterated its ‘overweight’ rating following the release of its full-year results.
The bank, which hiked its price target to 895p from 770p, pointed to growing confidence in the mid-term outlook and peer group re-rating.
“Shares have rallied, but Pearson is poised for a sustained return to growth – the strategy update delivered an upbeat message on positioning and long-term outlook, and we see catalysts ahead as chief executive officer Andy Bird delivers on the direct-to-consumer strategy,” ML said.
The bank said Pearson’s new strategy looks set to deliver a return to sustained revenue and profit growth.
“We see an attractive recovery story not fully appreciated by current market valuation. We expect a turning point in the prospects for the North American Courseware division as it moves closer to completing a protracted transition to digital formats.
“And Online Learning businesses (Virtual Schools and Online Program Management) look set to benefit from accelerated digital shifts post-Covid.”
ML said a new CEO and a strong balance sheet suggest scope for both acquisitions and disposals.
At 1310 GMT, the shares were up 1.6% at 819.40p.
