Shares in The Sage Group (LON:SGE) have lost ground in London in today’s session as Goldman Sachs lowered its rating on the software specialist. The move came after earlier this week, UBS trimmed its price target on the FTSE 100 company, questioning its ability to innovate amid its push to transfer to a cloud-based, software-as-a-service (SaaS) model.
As of 13:28 GMT, Sage’s share price had given up 1.91 percent to 594.40p. The company is one of the biggest fallers in percentage terms on the FTSE 100 index which currently stands 0.55 percent lower at 7,000.54 points.
GS lowers stance on Sage
Goldman Sachs lowered its rating on Sage from ‘buy’ to ‘neutral’ today, further slashing its price target on the shares from 780p to 670p. WebFG News quoted the analysts as explaining that while the FTSE 100 group’s revised FY19 outlook had resulted in a significant estimates reset, it was more realistic in light of the strategic challenges faced by the company in the near term as it transitions to cloud.
The Sage Group recently updated investors on its full-year performance, warning that its organic revenue growth rate may decrease in the short-term as the group shifts to a subscription model.
“The revised outlook seeks to address Sage’s shortcomings in terms of technology and R&D, as well as recognises the need to shift to a subscription model,” the analysts pointed out. “Having said that, we believe this process will take time and given the stock’s positive reaction post revised outlook, we see a more balanced risk reward at current levels and downgrade Sage.”
Analyst ratings update
UBS reiterated its ‘neutral’ rating on The Sage Group earlier this week, trimming its valuation on the shares from 700p to 590p. According to MarketBeat, the blue-chip company currently has a consensus ‘hold’ rating and an average price target of 629.17p.