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SAP Stock Surges 31.4% Year to Date: Will the Momentum Last?
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SAP SE’s (SAP - Free Report) stock is continuing its upward trajectory, with a gain of 31.4% in the past year compared with 16.7% and 18.1% growth of the S&P 500 composite and the sub-industry, respectively.
The company is one of the largest independent software vendors in the world and the leading provider of enterprise resource planning (ERP) software. SAP boasts an extensive partner ecosystem with above 20,000 partners worldwide in more than 140 countries.
Cloud Strategy Yielding Results
SAP has been primarily concentrating on expanding its cloud business to become one of the leading players in the category. In the last reported quarter, the current cloud backlog — a key indicator of go-to-market success in cloud business — increased 27% (up 28% at cc) to €14.18 billion.
Image Source: Zacks Investment Research
The company’s efforts have received a major push with the launch of Rise with SAP solution. This solution helps companies transform its business processes and operations to become more nimble, digital and intelligent. SAP solution continues to gain significant traction and will aid the company in driving its market share in the cloud ERP solutions space.
Rise with SAP will also help the company boost the uptake of its SAP S/4HANA solution by providing customers with more options for implementation and support from certified partners.
Momentum in other cloud offerings like Grow with SAP and SAP Datasphere, as well as strategic acquisitions and collaborations, bodes well for its cloud business.
Given the strong momentum in the cloud business, management anticipates 2024 cloud revenues in the range of €17-€17.3 billion, which indicates an increase of 24-27% at cc on a year-over-year basis. Cloud and software revenues are expected to be between €29 billion and €29.5 billion, which implies 8-10% growth at cc on a year-over-year basis.
SAP expects cloud revenues of more than €21.5 billion and total revenues of more than €37.5 billion for 2025.
Opportunities in Generative AI
Management remains optimistic about the generative AI trend and expects it to positively impact revenues going forward.
With the focus on vital strategic growth areas, especially Business AI, and to position the company for growth, SAP is taking up a restructuring program in 2024. Under this plan, it intends to eliminate 8,000 positions across its operations to ensure the company’s skill set and resources are well-poised to meet future business requirements.
Estimate Revision Activity
The Zacks Consensus Estimate for SAP’s 2024 and 2025 revenues is pegged at $36.46 billion and $40.69 billion, respectively, which indicates growth of 8.2% and 11.6% from the year-ago levels.
The consensus estimate for 2025 EPS implies a rise of 34.9% from the prior-year actuals to $6.15.
A Few Headwinds
Continued softness in the Software license and support business segment and global macroeconomic weakness are concerning. Increasing costs and stiff competition are additional headwinds for this Zacks Rank #3 (Hold) stock.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 EPS is pegged at $2.68. NVIDIA’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 18.4%. The long-term earnings growth rate is 37.6%. Shares of NVDA have risen 201.2% in the past year.
The Zacks Consensus Estimate for Onto Innovation’s 2024 EPS is pegged at $5.05, unchanged in the past 30 days. ONTO’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average surprise being 2.6%. Shares of ONTO have gained 107.4% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2024 EPS has remained unchanged in the past 30 days at $5.88. WWD’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 26.1%. The long-term earnings growth rate is 16.5%. Shares of WWD have risen 48% in the past year.
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SAP Stock Surges 31.4% Year to Date: Will the Momentum Last?
SAP SE’s (SAP - Free Report) stock is continuing its upward trajectory, with a gain of 31.4% in the past year compared with 16.7% and 18.1% growth of the S&P 500 composite and the sub-industry, respectively.
The company is one of the largest independent software vendors in the world and the leading provider of enterprise resource planning (ERP) software. SAP boasts an extensive partner ecosystem with above 20,000 partners worldwide in more than 140 countries.
Cloud Strategy Yielding Results
SAP has been primarily concentrating on expanding its cloud business to become one of the leading players in the category. In the last reported quarter, the current cloud backlog — a key indicator of go-to-market success in cloud business — increased 27% (up 28% at cc) to €14.18 billion.
Image Source: Zacks Investment Research
The company’s efforts have received a major push with the launch of Rise with SAP solution. This solution helps companies transform its business processes and operations to become more nimble, digital and intelligent. SAP solution continues to gain significant traction and will aid the company in driving its market share in the cloud ERP solutions space.
Rise with SAP will also help the company boost the uptake of its SAP S/4HANA solution by providing customers with more options for implementation and support from certified partners.
Momentum in other cloud offerings like Grow with SAP and SAP Datasphere, as well as strategic acquisitions and collaborations, bodes well for its cloud business.
Given the strong momentum in the cloud business, management anticipates 2024 cloud revenues in the range of €17-€17.3 billion, which indicates an increase of 24-27% at cc on a year-over-year basis. Cloud and software revenues are expected to be between €29 billion and €29.5 billion, which implies 8-10% growth at cc on a year-over-year basis.
SAP expects cloud revenues of more than €21.5 billion and total revenues of more than €37.5 billion for 2025.
Opportunities in Generative AI
Management remains optimistic about the generative AI trend and expects it to positively impact revenues going forward.
With the focus on vital strategic growth areas, especially Business AI, and to position the company for growth, SAP is taking up a restructuring program in 2024. Under this plan, it intends to eliminate 8,000 positions across its operations to ensure the company’s skill set and resources are well-poised to meet future business requirements.
Estimate Revision Activity
The Zacks Consensus Estimate for SAP’s 2024 and 2025 revenues is pegged at $36.46 billion and $40.69 billion, respectively, which indicates growth of 8.2% and 11.6% from the year-ago levels.
The consensus estimate for 2025 EPS implies a rise of 34.9% from the prior-year actuals to $6.15.
A Few Headwinds
Continued softness in the Software license and support business segment and global macroeconomic weakness are concerning. Increasing costs and stiff competition are additional headwinds for this Zacks Rank #3 (Hold) stock.
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are NVIDIA Corporation (NVDA - Free Report) , Onto Innovation (ONTO - Free Report) and Woodward (WWD - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 EPS is pegged at $2.68. NVIDIA’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 18.4%. The long-term earnings growth rate is 37.6%. Shares of NVDA have risen 201.2% in the past year.
The Zacks Consensus Estimate for Onto Innovation’s 2024 EPS is pegged at $5.05, unchanged in the past 30 days. ONTO’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average surprise being 2.6%. Shares of ONTO have gained 107.4% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2024 EPS has remained unchanged in the past 30 days at $5.88. WWD’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 26.1%. The long-term earnings growth rate is 16.5%. Shares of WWD have risen 48% in the past year.