Broker tips: Sage, Lloyds Banking Group, James Fisher

(Sharecast News) - Analysts at Canaccord Genuity lifted enterprise software firm Sage from 'hold' to 'buy' on Monday, arguing that a recent sell-off has created an attractive entry point for investors. Canaccord Genuity said sentiment had swung heavily in favour of perceived GenAI winners such as semiconductor names, leaving large‑cap enterprise software stocks out of favour, but it believes Sage to be relatively well insulated from the threat of AI‑native competitors encroaching on its customer base.

Canaccord said the shares' recent underperformance looked overdone, noting that despite a solid first‑quarter update showing 10% organic sales and annual recurring revenue growth, the stock was down 12% year‑to‑date and has lagged the FTSE 100 by 45% over the past year, even as earnings forecasts edged higher and buybacks continued.

The Canadian bank argued that the current valuation was overly pessimistic for a business delivering consistent free cash flow and earnings per share compounding, with 97% recurring revenue. It also said Sage's reverse discounted cashflow suggests that the market was pricing in just 1.5% nominal long‑term growth from 2030 onwards, while the shares trade on 17x CY26 earnings - the same level seen during the Covid‑era market lows.

Canaccord added that Sage should continue to compound earnings, even if growth slows to mid‑single digits, given a 6% free cash flow yield, a modelled 2.4% dividend yield and the potential for buybacks to add 3-4% EPS growth per year. Combined with operating leverage, the broker sees scope for high single‑digit EPS growth.

After adjusting forecasts for a weaker US dollar, Canaccord genuity also set a new price target of 1,135p, up from 1,100p and implying around 20% upside.

Shore Capital downgraded Lloyds Banking Group to 'sell' from 'hold' on Monday following a strong run that has left the shares fully valued, but lifted its price target on the stock to 91p from 84p.

Shore Capital said Lloyds' full-year results showed better-than-expected profitability primarily due to a lower-than-expected impairment charge in the fourth quarter, making this a "relatively low-quality" beat.

Nevertheless, return on tangible equity guidance for FY26 was upgraded to more than 16% from more than 15%, which Shore thinks the company will "comfortably" achieve.

However, Shore Cap said Lloyds may struggle to sustain the ROTE in the long-term "given the competitive pressure and risk of further taxation that such supernormal returns may eventually attract".

Over at Berenberg, analysts reiterated their 'buy' rating on James Fisher after the marine engineering services firm released a full-year pre-close trading update that confirmed trading in the latter months of FY25 was ahead of management expectations.

James Fisher said FY25 revenue was expected to be roughly £395m, up 4% year-on-year, while adjusted underlying earnings were now anticipated to be approximately £28m. Profit margins improved due to James Fisher's continued focus on productivity gains, supply-chain efficiencies, a decommissioning turnaround and business mix.

The German bank, which also kept its 615p target price on the stock, noted that James Fisher's defence order book had benefited from recent contract wins, including the JFD Polish Navy contract.

"Overall, we think this was a strong update, showing that management action in recent years is starting to deliver results. We upgrade our FY25E adjusted EBITA forecast by 9% to £27.5m and our adjusted EPS estimate by 23% to 21.6p," said Berenberg.

"We see scope for the current trading momentum to continue through 2026 and 2027 given the tailwinds that are supporting the Energy and Defence businesses. Management action in recent years is starting to deliver results and we forecast further cost efficiencies to deliver additional margin benefits. The shares trade on 18x our CY26E earnings forecast, falling to 14x for CY27E, with CY27E EV/EBITDA of only 5x (including IFRS 16 lease liabilities), a 10%+ FCF yield and scope for a return to paying a dividend."

Reporting by Iain Gilbert at Sharecast.com