Broker tips: Sage, Alpha FMC

Detusche Bank upgraded Sage on Wednesday to 'hold' from 'sell' and hiked the price target to 800.0p from 590.0p as it said the software firm was turning a corner but areas of uncertainty remained.

The German bank noted it has been cautious about Sage for a very long time and the stock has underperformed European tech by around 30% over the past five years.

"Having said that, we noted in our more recent reports that management is making the right decisions in a competitive environment to turn Sage's growth trajectory around," it said. "Investments made into the business are now paying off with revenue momentum accelerating despite the macro environment getting tougher."

DB added that management deserves credit for this, hence the upgrade.

"Having said that, uncertainties remain around margin progress going forward, with management choosing to invest the growth upside into opex in FY22.

"There appears to be scope for better operating leverage into FY23 but with shares trading above software peer group multiples, we see a lot of this already priced in, while risks remain to Sage's SME customer base given general macro headwinds and particularly the state of the UK economy."

Analysts at Berenberg raised their target price on specialist consultancy services provider Alpha Financial Markets from 480.0p to 530.0p on Wednesday following the group's interim results.

Berenberg said Alpha FMC's first-half results showed "a remarkable acceleration in growth" across all divisions and geographies.

"In the first six months of the year, net fee income grew by 56.5%, with 45% organic growth, a 3% benefit from the annualisation of last year's Lionpoint acquisition, and an 8% FX benefit," said Berenberg.

"Our prior forecasts and the company's target of double-digit organic growth have been materially outperformed."

The German bank said this was evidence of a business performing "exceptionally well", proving both the "strength of its structural drivers" as well as the analysts' views on Alpha's "competitive advantage" against its larger competitors.

"We upgrade our FY23 forecasts by 10%, with our price target moving up similarly to 530.0p. This assumes 11.6% growth for the full year - a clearly conservative assumption given the group's current momentum," said Berenberg.