SAP stock holds steady as KeyBanc reiterates Overweight rating

Investing.com - KeyBanc has reiterated its Overweight rating on SAP (SAP:GR) (NYSE:SAP) with a price target of EUR290.00, following the company’s recent quarterly results. According to InvestingPro data, four analysts have recently revised their earnings estimates upward for the upcoming period, with the stock currently trading near its 52-week high of $313.28.

The German software giant’s cloud transition proceeded without disruptions, with constant currency growth rates in key areas exceeding expectations when adjusted for the strengthening euro against the dollar. Cash flow and margin targets remain intact despite management’s cautious commentary. InvestingPro data reveals SAP’s impressive 73.6% gross profit margin and 10.5% revenue growth over the last twelve months, though current valuations suggest the stock may be trading above its Fair Value. Get access to 12 more exclusive ProTips and comprehensive financial analysis with InvestingPro.

KeyBanc analyst Jackson Ader noted that market expectations have shifted since SAP’s previous earnings report. Three months ago, a slight beat and reiteration of full-year guidance based on a cautious macro outlook exceeded market fears, positively affecting the stock price.

The firm highlighted that software sector revenue multiples have expanded approximately 25% since SAP’s first-quarter results, rising from 5.6x to 7.0x. During this period, deal slippage has evolved from a possibility to a reality.

KeyBanc also noted that SAP’s CFO Dominik Asam indicated capital markets may be overshooting his assessment of the macroeconomic outlook, potentially signaling the beginning of a convergence between market expectations and company guidance.

In other recent news, SAP AG reported mixed second-quarter results, with non-IFRS earnings per share of €1.50, surpassing the consensus estimate of €1.45, and operating profit of €2.57 billion, exceeding the expected €2.42 billion. The company’s solid quarterly performance was noted by Bernstein, which raised its price target for SAP to $344 from $324, highlighting significant margin improvements. JMP Securities also increased its price target to $375, attributing the decision to strong cloud revenue growth. Meanwhile, Oppenheimer reiterated its Perform rating on SAP, acknowledging the company’s solid results that aligned with market expectations and its substantial progress in transitioning its ERP installed base to the cloud. However, SAP CEO Christian Klein mentioned that client hesitation due to President Trump’s tariffs is causing delays in service sign-ups. Piper Sandler reduced its price target to €345 from €355, citing trade uncertainty and prolonged sales cycles in certain sectors as concerns. Despite these challenges, SAP maintained its full-year 2025 guidance, reflecting confidence in its strategic direction.

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