Shares in technology group Sage (SGE) have fallen by 6.7% to 621.4p amid renewed negative analyst comment, making it by far the biggest faller among the UK’s FTSE 100 companies on Monday (20 Aug).
Sage is one of the UK’s largest software vendors providing accounting, human resources and a selection of other enterprise applications crucial to small and mid-sized businesses globally.
Analysts at Deutsche Bank have cut their recommendation on the stock to ‘sell’ flagging intensifying competition in the company’s key mid-market space. They are the latest in a series of analysts to turn negative on the investment case this year.
Deutsche believes competitors are gaining market share by luring Sage’s customers away. Rivals such as Intuit (which owns Quickbooks, which you may have seen advertised on TV recently), Xero and Kashflow have been growing quickly in recent years and are the most likely candidates to be luring customers away from Sage.
CONFIDENCE EBBING AWAY
Stock market analysts have been turning negative on the Sage story in increasing numbers during 2018 with worries intensifying over its ability to accelerate annual organic growth beyond the 6% or so mark it has been doing for several years.
Earlier this month the company announced slightly better trading for its third quarter to 30 June, revealing organic growth of 6.8%, accelerating from the 6% recorded in the first six months of this year to 30 September.
Yet that still leaves the company with plenty of work to do if it is to meet Sage’s own 7% target for the full year. That objective was also downgraded from an 8% mark guided at the start of the year.
Sage shares have been under pressure through most of 2018, down 22% year to date.
The consensus of analyst opinion on the stock remains mixed with eight still seeing value and recommending clients ‘buy’ the stock. That compares to four analysts with a ‘sell’ rating and seven sat on ‘hold’ recommendations, according to data from Reuters.