JP Morgan sees huge potential for Sage Intacct

(Sharecast News) - JP Morgan has placed Sage on its "positive catalyst watch" ahead of the accounting software group's fourth-quarter results in November, where it expects to see solid growth with its cloud finance offering Intacct. The bank reiterated its 'overweight' rating on the stock with a 1,100p target price.

Analyst Toby Ogg highlighted Intacct is Sage's most important product and growth engine, which accounts for around 15% of sales (expected to grow to 30%), and contributed 4.5 percentage points to organic growth in the past financial year.

"Based on our analysis and industry discussions, we believe Intacct is a leading asset in the mid-market core financial management software space and is poised to continue taking share as its addressable market goes through a generational shift to the cloud," Ogg said.

Ogg believes Sage Intacct will drive consensus forecast for Sage higher through its North American exposure and international roll-out over time.

"Sage is a key conviction in European Software with an under-appreciated 10%+ revenue growth profile, mid-term margin potential of ~25%, mid-teens sustainable EPS growth, balance sheet optionality, attractive valuation (~5% clean '25 FCF yield vs key peer Intuit ~3%) and runway of incremental buyers."

Ogg said to expect "robust guidance" when Sage gives its fourth-quarter update on 22 November.

The stock was up 0.8% at 980.6p by 0901 BST.