Shore Capital downgrades Pearson on valuation

Shore Capital downgraded education publisher Pearson to 'hold' from 'buy' on Friday on valuation grounds.

The broker noted that Pearson shares have risen by around 17% since it upgraded its recommendation on 17 October, outperforming the market by 7% over a one-month view.

"This rally has closed out the valuation anomaly that we identified at that time and when viewed relative to our fair value estimate of 926p per share, its stock now looks up with events - potentially creating a profit-taking opportunity. We have therefore decided to move back to hold."

Shore Capital said it had upgraded the stock to 'buy' on the back of a positive tone in its nine-month trading statement, which was at odds with the stock valuation following a period of share price weakness.

It also highlighted an upbeat call accompanying the statement, which flagged a "good competitive performance", encouraging progress in addressing structural challenges in its end markets and confidence in delivering against full-year expectations.

At 1550 GMT, the shares were down 0.8% to 944.60p.