Sage coverage initiated with a Sell
Panmure Gordon’s technology research analyst Paul Morland initiated coverage of Sage with a Sell recommendation and a target price of 590p. At the time of initiation, shares were trading at 720p.
Over the last three years, Sage’s earnings would have gone backwards had it not been for weak sterling. The outlook is now for slowing top line growth and limited margin upside, due to:
- A one-off boost to recurring revenues this year from migrations and reactivations
- Increased investment in S&M and R&D in an attempt to attract new customers and grow ARR (on which 80% of D’s bonuses are dependent)
- Only 10% of revenues coming from Cloud native solutions (mostly Intacct) and a failure to disclose meaningful Cloud metrics
- Flat customer numbers, few new customer wins and ongoing market share losses to players such as Xero that do have Cloud native solutions.
For more information, please contact Paul Morland.