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SocGen cuts rating, ups price target on Pearson

Société Générale has downgraded its rating for Pearson to ‘hold’ after a strong run for the blue chip’s shares.

The bank, which previously had a ‘buy’ rating on the educational publisher, said the digital acceleration driven by Covid-19 helped Pearson’s “much-needed” print-to-digital transition, adding: “New chief executive Andy Bird has outlined a five-year vision that takes advantage of this momentum without kitchen sink investment.”

It continued: “We update our model to reflect guidance given at the full-year results, albeit with some headwind from currency and no buyback, resulting in -23% and -9% adjusted earnings per share downgrades for 2021 and 2022.

“Our target price rises to 865p as we reflect the far more important reduced risk in our valuation approach. But with the shares having enjoyed a strong run – +46% over the last 12 months and +19% over three months – and our revised target price offering a more modest 9.5% total shareholder return, we downgrade our rating to ‘hold’.”

As at 1345 GMT, shares in Pearson were trading 1% lower at 800.0p.

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