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Pearson selling "seems to be over" says Deutsche Bank

Last month the FTSE 100-listed firm issued a profit warning due to weaker US higher education business

Pearson PLC - Deutsche Bank upgrades Pearson to ‘hold’
The publisher is now focusing its strategy on digital

A wave of selling in Pearson PLC (LON:PSON) shares "seems to be over", says Deutsche Bank, leading it to upgrade the educational publisher to ‘hold’ from ‘sell’.

Last month, the FTSE 100-listed firm warned that it expected adjusted operating profit to be at the bottom of its £590mln-£640mln guidance range, due to weaker US higher education business.

READ: Pearson plunges to 18-month low after warning on weak US courseware

US higher education courseware, which represents around a quarter of the turnover, is seen declining between 8% to 12% this year, with the group's previous forecasts having estimated a fall of between 0% and 5%.

Students are increasingly shifting to materials they can procure for free, with the publisher now focusing its strategy on digital, but this is "not new news" any more, said the Deutsche analysts.

With the shares having plunged 20% since the update, Deutsche Bank cut its share price target to 600p from 650p and said it was upgrading its rating as the shares were now nearing its revised target price, meaning "the downside now appears more limited".

Consensus earnings remained mostly unchanged in 2019 at £787mln and moved down by 7% and 9% in 2020 and 2021 to £818mln and £843mln, respectively.

Shares were a couple of pennies higher at 677p by mid-morning on Monday.

Quick facts: Pearson PLC

Price: 653.8 GBX

LSE:PSON
Market: LSE
Market Cap: £5.11 billion
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