The Sage Group PLC (LSE:SGE) shares plummeted close to 5% despite it reporting third-quarter results in line with expectations and keeping its guidance unchanged.
Analysts at Shore Capital labelled the results “a reassuring trading update” and said it expected a “neutral/slightly positive reaction in the shares this morning”.
However, with the opposite occurring, it may have been driven by a deceleration in organic revenue growth compared to 2023 and its warning about the wider industry backdrop.
Total revenue increased by 9% to £1.74 billion for the nine months ended 30 June, helped by growth in various regions and advancements in its cloud business, the group revealed on Tuesday.
Jonathan Howell, finance chief at Sage, also confirmed full-year guidance was kept unchanged.
Howell said: "Sage performed well in the first nine months, delivering revenue growth in line with our expectations and sustaining good momentum, despite ongoing macroeconomic uncertainty.”
Shore Capital added that back in May Sage was forced to lower its organic growth outlook, which may have spooked investors.
Analysts said: “The nudge down on the organic growth outlook back in May, raised questions about whether the growth cycle is turning for Sage, or whether sales cycles are just temporarily longer amid high interest rates, after a successful Cloud transition.
“We are not unduly concerned by this, noting Sage’s breadth and diversity, and ability to drive NCA, deeper customer relationships and higher lifetime values.”
Shore Capital maintains a ‘hold’ rating for the stock and sees fair value at 1,100p per share, a nearly 7% premium to its current market value.