Broker snap: Jefferies downgrades Sage, reduces growth forecasts

13th Apr 2012 10:38

Jefferies has this morning downgraded its rating for business software group Sage from buy to hold, saying it is turning a 'bit more cautious' despite continuing to favour the positioning and management of the company.Sage's core business remains exceptionally stable, the broker acknowledges, underpinned by two-thirds of its revenue derived from recurring subscription and support contracts. "These defensive attributes are highly attractive to investors at times of higher economic uncertainty as any volatility in licence sales tends to exert a relatively muted impact on group revenue."However, 2012 expected growth rates have prompted a more neutral stance on the stock, with Jefferies forecasting just 3.4% organic growth, down from the previous estimate of +5%. "First-half licence sales are likely to have been particularly weak in Spain, as well as difficult in France and the UK."The broker cuts its target price from 345p to 320p.Shares were trading down 2.34% at 288.6p in mid-morning trade.BC