I love snapping up blue-chip FTSE 100 shares when they’re going cheap. In that respect, I’m from the same school as Warren Buffett, who’s claimed that
Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.
Having said that, targeting stocks to buy after they’ve sunk in value can be high risk. I’ve been rewarded by buying ‘falling knife’ Softcat shares earlier this year as the IT giant has recovered. My decision to invest in baker Greggs’ shares, on the other hand, has left me nursing a big paper loss.
I have no plans to change my strategy, though. Buying on the dip is a proven way to make stratospheric returns if you make the right call. However, have I made a big mistake by buying Sage (LSE:SGE) shares?
What’s going on?
Over the last year, Sage’s share price has plunged a whopping 31%. This has pulled the company’s price-to-earnings (P/E) ratio for 2026 to 18.9 times, falling to 16.1 times for 2027.
Both are below the 10-year average of 31-32. So Sage shares also appear to be a snip based on expected growth. Annual rises of 21% and 17% are tipped by City analysts for 2026 and 2027 respectively.
The thing is, there’s nothing in the company’s recent trading statements that suggests something is up. Annual recurring revenue and organic revenue both accelerated in the six months to March, meaning double-digit growth (of 11% and 10%) continued.
Operating margins increased 1% in H1 too, to 21.5% thanks to tight cost management and the transition to higher-margin products. Combined with that revenues surge, Sage’s operating profit surged 15% in H1.
Why is Sage down then?
Yet, for investors, fears over how artificial intelligence (AI) may affect customer demand just won’t go away. The question they’re asking is: just why will businesses pay a subscription-as-a-service (SaaS) company for their accounting and payroll functions when future AI agents could do this just as capably and at lower cost?
It’s a fair point. But on the other hand, AI could actually strengthen incumbents like Sage if they successfully embed these automated tools into their offerings. And judging by recent results, the business is making a really good fist of this, with the rollout of Sage Copilot and embedded AI agents keeping sales growth at double-digit rates.
It’s also interesting to note that Sage’s customer retention rates also continue climbing. I’m personally not expecting these to drop off, given the company is a trusted name in mission-critical areas like accounting, payroll, and compliance. The complexity and minimal cost benefits of switching providers also explains the durability of its customer base.
A 29% opportunity?
If City analysts are right, Sage shares could bounce back sooner than expected. Nineteen of them currently have ratings on the firm. Their average price target? On a 12-month horizon, it sits at £11.04, up 29% from today’s levels.
My view? While AI poses a risk, I think concerns over how this could affect Sage are now wildly out of hand. I think it’s one of the best FTSE 100 shares to consider given how cheap it is today.
Should you invest £5,000 in Sage Group Plc right now?
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Royston Wild owns shares in Sage, Softcat, and Greggs.
