Sage Earnings: Broadly in Line, but Tempered 2024 Revenue Growth Guidance Weighs on Shares

Narrow-moat Sage Group reported 9.5% organic revenue growth in its first-half 2024 results, with Sage business cloud’s organic revenue up 18%. While these results were broadly in line with our estimates, management marginally tempered fiscal 2024 organic revenue growth guidance from 10% to 9.5%. The underlying operating margin came in at 22%, representing a 160-basis-point expansion versus a year prior, and management expects the positive trend to continue in fiscal 2024 and beyond. Shares are trading down intraday, likely the result of the trim to guidance. We don’t expect to make a material change to our GBX 880 fair value estimate. At current levels, the shares remain overvalued.