BMO raises SAP stock price target to $307, maintains Outperform

On Tuesday, BMO Capital Markets updated their financial outlook for SAP AG (NYSE: NYSE:SAP), increasing the price target on the company’s shares to $307 from the previous $265. The firm sustained its Outperform rating on the stock. The adjustment follows SAP’s report of a strong financial quarter, prompting BMO Capital to slightly raise their estimates for the company’s calendar year 2025 constant currency revenue growth. The stock has shown remarkable momentum, delivering a 60% return over the past year and currently trading near its 52-week high of $277.36. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.

Keith Bachman, an analyst at BMO Capital, expressed that while SAP’s recent quarter results were solid, the free cash flow (FCF) forecasts for the company have been largely maintained, which he considers somewhat disappointing. Bachman notes that the majority of SAP’s growth is fueled by cloud conversions, with the company achieving 8% revenue growth in the last twelve months. He also mentioned potential challenges arising from the extension of SAP’s 2030 deadline to 2033, which could impact growth. The implications of this extension on customer financial commitments when choosing this path remain uncertain. InvestingPro subscribers can access 15+ additional insights about SAP’s financial health and growth prospects through the comprehensive Pro Research Report.

Despite these concerns, BMO Capital continues to be optimistic about SAP’s prospects. Bachman highlighted the company’s high visibility into future revenues as a positive factor. This visibility, coupled with the solid quarterly performance, has led to the increased price target.

SAP AG is navigating a technology landscape where cloud services are becoming increasingly critical for growth. The company’s ability to adapt and extend deadlines for cloud conversion may affect customer decisions and financial commitments.

BMO Capital’s new price target of $307 reflects their confidence in SAP’s strategy and market position. The firm’s analysis suggests that while there are potential headwinds, the overall narrative for SAP remains positive, with anticipated growth and revenue stability in the coming years.

In other recent news, SAP AG has seen significant developments in its financial landscape. The company’s recent earnings were slightly below consensus at €1.40 per share, but it saw an 11% sales growth, largely due to a robust 27% increase in cloud growth. Furthermore, SAP’s cloud backlog experienced a notable 32% growth, with the total backlog expanding by 43% to €63.3 billion, hinting at future revenues.

Analysts have adjusted their projections in response to these developments. CFRA raised SAP’s stock price target to $280, maintaining a Hold rating, while TD Cowen upgraded the stock from Hold to Buy and raised the target price to $305. However, CFRA later downgraded SAP from Buy to Hold due to valuation concerns.

SAP’s strategic focus on cloud and AI technologies has also been a point of interest for analysts. Nearly half of the company’s cloud backlog orders involve AI use cases, and cloud ERP sales have seen a substantial 35% increase.

In workforce news, SAP is undergoing a significant reduction as part of its " Next (LON:NXT) Level Transformation" program, with approximately 3,500 of its 25,000 employees in Germany set to depart the company. These are among the recent developments shaping SAP’s financial performance.

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