SAP Earns an Upgrade at BMO Capital
BMO Capital analysts upgraded SAP (NYSE:SAP) to Outperform from Market Perform and increased their price target on the stock to $237 from $218. The analysts highlighted that SAP has strong visibility into bookings and revenues for the upcoming years, driven primarily by the conversion of its extensive and loyal installed base to cloud offerings.
Key catalysts for the stock include a steady growth pace in the Current Cloud Backlog and Cloud ERP, along with achieving significant milestones towards the goal of €8 billion in free cash flow by fiscal 2025.
| Symbol | Price | %chg |
|---|---|---|
| CRM.BA | 22150 | 0 |
| GOTO.JK | 69 | 0 |
| GOOGL.SW | 1077.82 | 0 |
| 4684.T | 4700 | 0 |
SAP Reports Q2 Beat, But Cloud Revenue Worse Than Expected
SAP SE (NYSE:SAP) reported its Q2 earnings results on Thursday, with a profit of €0.62 per share on revenue of €7.55 billion, compared to the Street estimate of €0.54 and €7.2 billion, respectively.
However, SAP's Cloud and software revenue was reported at €6.51 billion, falling short of the average analyst expectations. Similarly, cloud-only revenue came in at €3.32 billion, also below analysts' expectations. Despite this, the cloud revenue showed a year-over-year increase of 22% at constant currency rates.
SAP adjusted its full-year operating profit outlook modestly, raising it to a range of €8.65 to €8.95 billion, up from the prior forecast of €8.6 to €8.9 billion. Nevertheless, the cloud revenue forecast was lowered to €14.1 billion, down from the previous forecast of €14.2 billion.
SAP’s Analysts Day Review
Oppenheimer shared its key takeaways from SAP SE (NYSE:SAP) Financial Analyst Day, where management provided an upbeat strategy and financials presentation, consistent messaging around process automation, and an AI-focused innovation path.
Highlights included (1) revising the 2025 financial targets which removed a potential reset overhang, (2) deepening partnerships with Microsoft, Google and IBM on generative AI, and (3) announcing a €5 billion share repurchase program.
The analysts found that the information shared during the analyst day was more of a small step forward rather than significant, but they still feel optimistic about the company's strategy, the roadmap for generative AI, and the development of their product lineup.
SAP’s Analysts Day Review
Oppenheimer shared its key takeaways from SAP SE (NYSE:SAP) Financial Analyst Day, where management provided an upbeat strategy and financials presentation, consistent messaging around process automation, and an AI-focused innovation path.
Highlights included (1) revising the 2025 financial targets which removed a potential reset overhang, (2) deepening partnerships with Microsoft, Google and IBM on generative AI, and (3) announcing a €5 billion share repurchase program.
The analysts found that the information shared during the analyst day was more of a small step forward rather than significant, but they still feel optimistic about the company's strategy, the roadmap for generative AI, and the development of their product lineup.
SAP SE Shares Up 5% Following Pre-Reported Q3 Results
SAP SE (NYSE:SAP) shares were trading 5% higher on Wednesday following the company’s pre-reported solid Q3 results, with total revenue/cloud revenue, non-IFRS operating margins, and EPS beating Street estimates.
The company’s provided total revenue of €6.8 billion (up 5% year-over-year) came in better than the consensus estimate by around 170bps. Cloud revenue is €2.4 billion, growing 20% year-over-year and beating the Street estimate by around 130bps.
The company provided its full 2021-year guidance, increasing its cloud revenue estimate to the range of €9.4–9.6 billion.
According to the analysts at Oppenheimer, they are encouraged to see the acceleration of the current cloud backlog toward growth needed to obtain medium-term cloud targets (2025), and look forward to the company’s full results report on Oct 21 for more details.
