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Sage share price underperforms as UBS trims valuation

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Shares in The Sage Group (LON:SGE) have been little changed in today’s session, trailing behind the FTSE 100, as analysts at UBS trimmed their price target on the shares. Proactive Investors reports that the broker has questioned the blue-chip group’s  ability to innovate amid its push to transfer to a cloud-based, software-as-a-service (SaaS) model.

As of 13:24 GMT, Sage’s share price had added 0.28 percent to 578.00p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.63 percent higher at 6,996.50 points. The group’s shares have lost some 28 percent of their value over the past year, as compared with about a 5.5-percent dip in the Footsie.

UBS trims Sage’s price target

UBS, which has a ‘neutral’ rating on The Sage Group, trimmed its price target on the shares from 700p to 590p today. Proactive Investors quoted the analysts as saying that while the blue-chip software firm had lifted its investment spend to £60 million this year, the company’s investments had “lagged competitors for many years now, and we remain concerned about Sage’s ability to innovate”.

“While ‘cloud-native’ solutions reported 35-percent revenue growth in 2018 to reach £144 million (eight-percent sales), most of the growth came from acquired rather than organically-developed solutions,” the broker pointed out. “With competitors still circling, while the strategy looks more plausible, risks remain.”

The comments came after Sage updated investors on its full-year performance last week, cautioning that its  organic revenue growth rate may decrease in the short-term as the group shifts to a subscription model.

Other analysts on software group

The 16 analysts offering 12-month price targets for The Sage Group for the Financial Times have a median target of 595.00p on the shares, with a high estimate of 870.00p and a low estimate of 465.00p. As of November 24, the consensus forecast amongst 19 polled investment analysts covering the blue-chip group advises investors to hold their position in the company. 

As of 13:58 GMT, Monday, 26 November, The Sage Group plc share price is 578.60p.

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