SAP stock price target raised to $310 by TD Cowen

On Tuesday, TD Cowen analysts increased the price target on SAP AG (NYSE: NYSE:SAP) shares to $310 from $305, while reaffirming a Buy rating for the company. The adjustment follows SAP’s solid fourth-quarter performance, which showed an 11% constant currency (cc) growth in Cloud & Software (ETR:SOWGn), aligning with estimates. Unexpected strength in on-premise software sales was noted, but analysts believe this does not alter the trajectory for Cloud growth.

The report highlighted that SAP’s Cloud and Back-Office (CCB) segment experienced a growth of 29% cc, which is considered slightly above expectations. With an overall revenue growth of 8% and a healthy gross profit margin of 72.9%, SAP continues to demonstrate strong fundamentals. TD Cowen projects a growth target of approximately 27-28% for the year 2025. The firm’s stance is that valuations are likely to experience an upward trend over time as SAP’s growth accelerates towards mid double-digit figures, though InvestingPro analysis indicates the stock is currently trading above its Fair Value.

The analysts’ commentary included a positive outlook on SAP’s growth potential, stating, "We continue to expect upward pressure in valuations over time as growth accelerates towards mid double-digits." They also emphasized the strong performance in the CCB segment and reiterated their Buy rating, signaling confidence in the company’s future performance.

SAP’s fourth-quarter results seem to have met the market expectations, with a particularly strong showing in the on-premise segment, which took analysts by surprise. However, the focus remains on the company’s Cloud growth, which is expected to be the main driver of valuation increases moving forward.

In conclusion, TD Cowen’s updated price target and maintained Buy rating on SAP stock reflect the firm’s optimism about the company’s growth trajectory, especially in the Cloud sector. The anticipation of growth acceleration and the potential for increased valuations are key factors in the firm’s positive outlook on SAP. For deeper insights into SAP’s valuation metrics and growth potential, investors can access comprehensive analysis and 17 additional ProTips through InvestingPro, which includes detailed research reports and advanced financial metrics.

In other recent news, SAP AG has been the focus of various analyst adjustments following its recent earnings and revenue results. BMO Capital Markets raised SAP’s price target to $307 and maintained its Outperform rating, influenced by the company’s strong financial quarter. CFRA, however, downgraded SAP from Buy to Hold due to valuation concerns, while TD Cowen upgraded the stock from Hold to Buy and raised the target price to $305. JPMorgan maintained an overweight rating for SAP, noting the company’s solid balance sheet.

SAP’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. The company’s cloud backlog experienced a notable 32% growth, hinting at future revenues.

SAP is also undergoing a significant workforce 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 recent developments highlight the evolving financial landscape for SAP.

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