Analysts at Canaccord Genuity revised their target price for shares of accounting software designer Sage after the company guided towards an acceleration in recurring revenues to over 9% for the current year.
To that they added that the company’s track record meant that one could “reasonably” expect net revenue retention to remain at around 100.
So even without much additional customer growth, even assuming “a couple of extra points of churn” to reflect insolvencies among small and medium-sized enterprises, Sage had “pretty good” visibility.
That would hold true they judged even if the non-recurring bit of the business saw a more rapid decline than over the past three years.
“The bottom line is unless Sage’s key markets in Western Europe and the US see a prolonged severe recession, our new revenue forecasts seem well underpinned,” the analysts said.
Furthermore, margin expansion should drive double-digit earnings per share growth, they said.
Canaccord raised its target price for the shares from 875.0p to 915.0p, while keeping its recommendation for the shares at ‘buy’.
