Canaccord lowers target price on Sage

Analysts at Canaccord Genuity lowered their target price on software group Sage from 790.0p to 700.0p on Monday despite the group's full-year results coming in ahead of expectations.

Canaccord highlighted that Sage's full-year sales were £1.90bn, ahead of consensus estimates of £1.88bn, while underlying earnings and earnings per share also beat estimates at £411m and 27.4p, respectively.

In addition to the strong showing, Canaccord also noted that Sage's guidance called for 3-5% organic recurring growth, bang in line with current consensus of 4.0%.

"This equates to total group revenue growth guidance of c. 2-4% (there is only a very small element that is not recurring). FY21 operating margin guidance is for "over 19.0%" vs current consensus of 22.0%. This implies underlying operating profit at a minimum could be around £350m if 19% is assumed," said the analysts.

However, the Canadian bank said margin guidance was "disappointing" at "over 19%" as a result of extra investment in research and development and sales and marketing.

"We understand a 19% margin 'minimum' would apply if revenue growth was at (or exceeded) the top end of the range; therefore, we estimate FY21 margin to be 20-21%," added Canaccord, which also reiterated its 'buy' rating on the stock.