On Wednesday, TD Cowen’s analyst Derrick Wood increased the price target for SAP AG (NYSE: NYSE:SAP) shares to $320.00, up from the previous $315.00, while reiterating a Buy rating on the stock. The software giant, now commanding a market capitalization of $322 billion, has demonstrated robust financial health with a "GOOD" overall score according to InvestingPro metrics. Wood’s assessment followed SAP’s first-quarter results, which he described as slightly soft but still within the realm of steady performance. SAP reported a 13% constant currency growth in its Cloud & Software segment, which was slightly below TD Cowen’s estimate by 1 percentage point. The minor shortfall was attributed to some 4Q deals that had their go-lives pushed into the subsequent quarter.
Despite the slight miss, SAP’s backlog growth met expectations, and the company reaffirmed its forecast for fiscal year 2025, signaling confidence in its business outlook. Management highlighted strong pipelines and stable closing rates for deals, indicating a solid foundation for future growth. This confidence is supported by SAP’s impressive 73.19% gross profit margin and 9.51% revenue growth over the last twelve months. The company has also maintained dividend payments for 34 consecutive years, demonstrating long-term financial stability. For deeper insights into SAP’s financial metrics and growth potential, InvestingPro offers comprehensive analysis with 12 additional key tips for investors. Wood expressed optimism about SAP’s prospects, suggesting that the company’s stable performance in the current market conditions could lead to a "relief rally" among investors.
The analyst’s commentary pointed out that while the first quarter showed some delays, the overall trajectory for SAP remained positive. SAP’s management’s reassurance about the firm’s pipelines and closing rates was a key factor in maintaining the Buy rating. Wood’s outlook for SAP suggests that the market could respond favorably to the company’s consistent strategy and its ability to sustain growth despite minor setbacks.
SAP AG, known for its enterprise software and cloud solutions, is navigating a competitive and rapidly evolving technology landscape. With the updated price target and maintained Buy rating, TD Cowen signals its belief in SAP’s strategy and potential for growth, underpinned by the company’s solid financial guidance and operational metrics. The raised price target reflects the firm’s analysis of SAP’s market position and future revenue prospects. While current trading levels suggest the stock may be overvalued according to InvestingPro’s Fair Value analysis, the company’s moderate debt levels and strong analyst support indicate potential for continued success. Access the comprehensive Pro Research Report, available for SAP and 1,400+ other top stocks, for detailed valuation analysis and expert insights.
In other recent news, SAP’s first-quarter results for 2025 have drawn attention from analysts, with several firms adjusting their outlooks. The company reported non-IFRS earnings per share of €1.44, exceeding the consensus estimate of €1.32, and an operating profit of €2.46 billion, which surpassed the anticipated €2.25 billion. Total revenue reached €9.01 billion, reflecting an 11% year-over-year increase when adjusted for constant currency. BMO Capital Markets raised its price target for SAP to €320, maintaining an Outperform rating, citing a strong start to the software earnings season and potential for upward revisions to cash flow forecasts. KeyBanc Capital Markets also maintained an optimistic stance with an Overweight rating and a EUR290 price target, noting SAP’s resilience amid economic uncertainty. Meanwhile, Citi adjusted its price target down to EUR280 from EUR300, maintaining a Buy rating due to macroeconomic and geopolitical uncertainties. TD Cowen increased its price target to $315, maintaining a Buy rating, highlighting SAP’s historical ability to navigate challenges and its growth outlook for 2025.
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