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10 Mar 2021 | 12:15

BofA Merrill Lynch reiterates 'overweight' on Pearson, hikes price target

(Sharecast News) - 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.
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