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Sage Group shares plummet as Deutsche Bank downgrades software firm to 'sell'

The competitive situation in Sage's core mid-market franchise appears to be worsening, according to Deutsche Bank

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Microsoft is one of Sage's rivals

Shares in software firm The Sage Group (LON:SAGE) plunged on Monday after Deutsche Bank downgraded the stock to a ‘sell’ rating from ‘hold’ and cut its target price to 540p from 630p.

Deutsche Bank said after speaking to a number of accountants and resellers across the UK, US and Australia, along with senior figures from key competitors Xero and Intuit, its key takeaway from these conversations is that the competitive situation in Sage's core mid-market franchise “appears to be worsening”.

READ: Sage Group's organic revenue growth picks-up

“Entry level players at far lower price points are moving upmarket and are building functionality either internally or through third-party platform partners,” the bank said.

“Higher-end competitors also appear to be gradually gaining share from Sage's core user and reseller base.

“We would highlight Microsoft as the stand out player here, with the Dynamics suite cited by Sage resellers as the most frequently seen competitor and furthermore, the Dynamics 365 SaaS suite grew at 56% at constant  currencies in the fourth quarter.”

Microsoft’s Dynamics 365 is a product line of enterprise resource planning and customer relationship management software applications.

In morning trading, shares in Sage fell 6.4% to 623p.

Quick facts: The Sage Group plc

Price: 690 GBX

LSE:SGE
Market: LSE
Market Cap: £75.14 m
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