By Michele Maatouk
Date: Thursday 08 Apr 2021
LONDON (ShareCast) - (Sharecast News) - Citi upgraded its stance on shares of software company Sage on Thursday to 'buy' from 'neutral' as it pointed to improving news flow.
"Covid uncertainty and the short-term margin outlook have led to Sage underperforming since its 100p price fall to 588p on FY21 results day (20th November 2020)," Citi said.
"We believe that news flow has begun to turn more positive and the valuation will begin to reflect growing confidence in the group's longer-term growth prospects."
As a result, the bank said it has adjusted its longer-term top-line growth and margin assumptions in the discounted cash flow-based valuation model, giving it a new target price of 770p per share from 619p.
"In addition, Sage's cash flow characteristics and balance sheet strength would, we believe, support an leveraged buyout-type takeout price of 790p."