SAP - SAP: Strong Outlook Ahead But Fully Priced

2024-01-28 10:12:26 ET

Summary

• SAP's cloud revenue growth has remained strong, driven by its multi-product platforms and the ability to cross-sell to existing customers.
• It plans to incorporate AI into its entire platform suite, while at the same time overhauling internal processes with AI to moderate headcount growth.
• Strong execution, however, is counterbalanced by a full valuation at ~25x FY25 P/E.

Almost any large-cap software company that has a whiff of AI advantage has enjoyed a strong rally over the past year, and SAP ( SAP ) is no exception. Building on the strength of its cloud conversion momentum, SAP has continued to produce double-digit cloud revenue growth, as the company's multi-product platforms, SAP RISE and SAP GROW, continue to sign up new customers and expand the install base....

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