Pearson PLC (LSE:PSON) has been downgraded by Deutsche Bank, which sees the recent rally as running ahead of itself giving uncertainty about the group's strategic priorities and medium-term targets.
The tuition group’s improving profitability and cash generation, balance sheet strength and defensive qualities are key reasons to hold the stock, especially given the momentum in Assessment and Higher Education returning to growth.
But with limited catalysts in the near term, 'hold' is a better reflection of the risk-reward balance, argues Deutsche Bank.
“Wait for greater clarity on new management’s strategic priorities, potentially with the announcement of 2023 results, before turning more constructive again,” it said.
'Hold' with a 1,050p (1,100p) price target is Deutsche's rating.