numberbiter
04 Dec 2016
Re: Struggling the way, I support Liberiam's note that a target price of 470p is about right, more than 300p below the current price of 787p.
numberbiter
04 Dec 2016
Re: Struggling The problem here is largely debt. If you look at the accounts over time, they seem to rack up debt and when the banks get nervous they sell a profitable business. This has the effect that both profits and debt comes down as you would expect. Then debt goes up again. They are holding the dividend, but as all this does is increase debt shareholders are paying themselves. With interest rates at around zero and the average equity (risk) return of around 2%, this share yields 6.7%, which means the company's shares have junk bond status.Obviously, this all means that this share is only for those who enjoy taking a risk. Being risk averse, I would sell this share.
Hardboy
19 Oct 2016
Re: Struggling Games, I agree that in the short term there is not a compelling case for this; but it is in the midst of a major transition and it seems the market (perhaps like you) seems to think it is doomed to failure. Print may have higher operational margins than on line, but probably not gross margins, when capital costs are included. Also Print is a declining market, on-line education is a growing market (as you allude to with the observation of the number of competitors.)The truth is we don't know if their chosen strategy will be a success or not. The people with the best view on the likely outcome are the people closest to it - the BoD and they have just said their projected out look is still valid; in fact if exchange rates stay at current levels it could lift profits by 10%. So their outlook is still to be making £800m operating profit in 2018. if they achieve that, the share price should be around double. The BoD also accept the dividend is not fully covered (during the transition phase) so it will be interesting & a test of their confidence to see if they maintain it over the next 2 years.
gamesinvestor
19 Oct 2016
Struggling to understand the continued attraction here.Nick Train makes the observation that it has more online educational users out there than all it's competitors combinedThis is a nice statement but having sold out of publishing and FT brand, it seems to be losing educational customers at a rapid clip.Surely the net returns from educational products are falling in value as competition fights hard to take market share, and despite the possible lower cost to deliver online material it doesn't look like the value can be recovered from the high margins historically achieved from difficult to copy printed material.I have no real basis for the last statement other than a gut feel. Can anyone challenge it with examples or good figures?I like Nick Train as one of the better fund mgrs but this one escapes me.The dividend looks false and is barely covered.Games
Hardboy
17 Oct 2016
Trading Update OK, the last month was not quite as good as markets expected, but they are going through a transition phase; and effectively they upped their full year expectations so now they are trading on a forward PE under 14; and they expect things to pick up after the transition. They still expect 2018 (post transition) operating profit of £800m. That computes at an EPS of around 97p. which is getting on for double this year's. The market is out of love with it; but if the BoD are right this is a bargain taking the 2 year + view. .
Shotry
17 Oct 2016
Re: Possible trade approaching Have to go and can't babysit this trade. Closed at 772. Still has the potential to go to 780 area, but I wouldn't hold overnight.
II Editor
17 Oct 2016
NEW ARTICLE: Pearson plummets again "Education group LSE
SONearson is learning lessons the hard way. A weaker-than-expected performance in the first nine months of the year pushed the share price down 10% Monday, unwinding most of the gains made since a recovery began three weeks ..."[link]
Shotry
17 Oct 2016
Re: Possible trade approaching Added at 750.8 to give a b/e of around 754.
Shotry
17 Oct 2016
Re: Possible trade approaching Price dropped to 739ish. That wasn't enough to trigger my limit buys. Have now entered at 758.3 after spread.
Shotry
17 Oct 2016
Possible trade approaching Price is 754. I have a target entry of around 730. There is plenty of risk of the price dropping below that. But I think the price will bounce between here and 730. I'm waiting for a long entry.
nk1999
04 Oct 2016
Morgan Stanley From ADVFN:"Education publisher Pearson got a boost on Tuesday as Morgan Stanley reiterated its 'overweight' rating on the stock and 1,050p price target, saying the market's expectations of another profit warning are unlikely to materialise.MS said the stock is too cheap, now down 25% from its highs and with a 2018 free cash flow yield of about 10% versus a price-to-earnings of 10x.It added that Pearson shares are the worst-performing large dollar earners in the UK post the Brexit vote.It said the shares have fallen since the first-half results on worries that lower H1 gross sales and higher returns in the US college business will lead it to miss its 2016 guidance of pre-restructuring cost EBITA of £580m-£620m, to abandon its 2018 £800m EBITA target and to cut its thinly covered dividend."Our view is that Pearson has structural challenges. It has too much print (35%), it does not have enough proprietary content and there is customer resistance to the high price of US college textbooks," the bank said.However, while accepting these shortcomings it also argued that the US College downturn will not be enough to cause Pearson to reduce its guidance for 2016, after it was already cut by around £400m in January 2016.In addition, it said next year is likely to be an up year for the company as the US Schools adoption market bounces back, the effect of lost US testing contracts falls away, the UK qualifications business picks up and the US college market improves."SP up 39.5p today to 802.5p.nk
Hardboy
23 Sep 2016
Re: Liberum Good post, tops. You are right about Parents paying to see their children get the best education they can afford. One only has to look at the thriving Fee Paying Schools & the huge (& completely unsizeable, because much of it is black economy) market for private tuition to know this. But for Pearsons to take advantage of this they need to ensure they have the best products. When you see a broker being negative and a BoD being positive, you have to think who really knows the market, and the business better, so who is more likely to be correct.
triceratops
23 Sep 2016
Re: Liberum I have made a few small buys over the past 12 months, my average is 790p so am a little underwater here, I intend to add again over the next 12-24 months, so it certainly looks as though I’ll be averaging down.I’d held back buying into them over the preceding 4-5 years precisely because they seemed too bullish on the earnings growth prospects of online education. I suspect the top line will be defended in the medium term but the margins will get squeezed by online competition whether it is Amazon or whoever. This is beginning to get priced in now. In the short term Liberium’s note of a 470p share target is not so far fetched if you assume a halving of the dividend and a warning of shrinking US market. To counter that gloom though Pearson have global recognition, trust and a growing world population eager to learn.My thesis for buying in case anyone’s interested.I don’t think it is quite as easy as people think to generate high quality educational resources without significant investment. Any parents of young children here will likely have seen “Active Learn” It is far better than any online learning resource you can access on the internet. It also allows teachers to monitor targets and set goals for the little darlings. It’s really impressive and I think people underestimate the “love deal” aspect of paying to give their children an edge in anyway they can. Parents are terrified of not investing in their kids futures. The pressure on the Schools/Colleges to provide a good quality online tutoring programme is also a big driver. Why do parents buy “work books” for their kids to do when they could print off a list of the same questions from the internet for free? Because they feel guilty for cheating their little ones out of something. “Nothing is too much trouble for my kids when it comes to their education” is a common one. So they “prove it” by spending money on Private Schools, Tutoring, Math’s clubs etc whatever the family can afford will get invested in their children’s future. This trend is getting more prevalent as “educational tourism” becomes more common not less. I think that underpins the long term strategy here, there will be a myriad of cheaper alternatives, but when it comes to educating our kids we want the best we can afford. Keep the quality of the product high, use the best resources available and parents, students will come to Pearson out of trust. Just my opinion of courseTops
nk1999
22 Sep 2016
Liberum Very pessimistic assessment - from Citywire:"Pearson ‘structurally at risk’The profitable educational publishing business at Pearson (PSON) is under threat from new educational resources models. Liberum analyst Ian Whittaker reiterated his ‘sell’ recommendation and target price of 470p on the shares, which fell 1.4% to 790p yesterday.‘An article in the Financial Times highlights how Open Education Resources are set to disrupt the higher education textbook market,’ he said. ‘This is our key concern with Pearson that its very profitable US higher education business – estimated 45% of group profits – is structurally at risk. However, we think that Open Education Resources has not yet had a major impact but that it is yet to come; textbook rentals seem to be the main disruptor so far and we think Pearson might be more at risk due to its revenue mix. Reiterate as top “sell”.’ "
sound money
08 Sep 2016
Re: Sp fall I had just gone long. Needless to say I have closed my position. Seriously thinking of shorting.M
