Deutsche Bank upgrades Sage to ‘hold’

Detusche Bank upgraded Sage on Wednesday to ‘hold’ from ‘sell’ and hiked the price target to 800p from 590p as it said the software firm was turning a corner but areas of uncertainty remain.

The bank noted it has been cautious on 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 said 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."