UBS cuts Software AG to 'neutral' on profit headwinds, shares drop

Software AG

15/02/2023 12:01

** Software AG  SOWGn.DE  falls as much as 4.7% after UBS
cuts to "neutral" from "buy", expecting investments to pressure
profits in 2023
    ** UBS notes that the German IT firm's SaaS (Software as a
Service) transition has not been as speedy as expected, making
up only 22% of bookings in Q4 2022 compared to 20% in Q1 2021
    ** "The need for high investments may persist, while the
cloud shift will continue to pressure profitability beyond 2023,
even if it is likely the margin trough, as we believe it will
be," the broker argues
    ** With reference to the recent profit margin outlook cut,
UBS believes that investors will be skeptical of new mid-term
targets set by Software AG on its upcoming capital markets day
in June
    ** In light of the company's poor track record on delivering
on its guidance and uncertain macro conditions, UBS cuts its EPS
forecast for 2023/24 by 10%/14%
        ** The stock trades down 2.4% at bottom of German midcap
index  .MDAXI 
  
 (Reporting by Johannes Toft Thyssen)
 ((johannesthyssen@thomsonreuters.com))