SAP stock price target raised to €348 by Barclays on cloud growth

Investing.com - Barclays has raised its price target on SAP (SAP:GR) (NYSE:SAP) to €348 from €322 while maintaining an Overweight rating on the German software giant. According to InvestingPro data, SAP currently trades at $278.53, with a P/E ratio of 43.4x and has delivered a 15.3% return over the past year.

The price target increase follows SAP’s recent earnings call, where management expressed optimism about the macroeconomic environment and sales pipeline, particularly noting improvements in the U.S. public sector and other segments that had experienced slowdowns in the first half of the year. The company’s robust financial health is reflected in its 73.8% gross profit margin and 10.3% revenue growth in the last twelve months.

Barclays highlighted that SAP CEO Christian Klein expressed confidence the company could deliver a Current Cloud Backlog (CCB) exit growth rate above 25% for the year, which the firm views as supportive of its outlook. The bank continues to model 26% growth for this key metric.

SAP’s cloud revenue growth is now guided at the low end of the company’s full-year range, implying 23-27% growth in the fourth quarter. Barclays models 26% growth for Q4, representing organically unchanged performance from Q3.

The rate of decline in SAP’s software revenues (license and maintenance) accelerated to -9% in Q3 from -4% in the first half, suggesting a larger proportion of cloud revenues comes from migration rather than new business, according to Barclays’ analysis. As a prominent player in the software industry, SAP has maintained dividend payments for 34 consecutive years, demonstrating consistent shareholder returns. Get deeper insights into SAP’s performance metrics and future outlook with InvestingPro’s comprehensive analysis tools and expert research reports.

In other recent news, SAP AG reported its third-quarter financial results, showing non-IFRS earnings per share of €1.59, surpassing the consensus estimate of €1.49. The company’s operating profit reached €2.57 billion, slightly above the consensus of €2.53 billion, while total revenue was €9.08 billion, aligning with expectations and reflecting an 11% year-over-year growth in constant currency. Despite these results, analysts had varied reactions to SAP’s performance and future outlook. TD Cowen lowered its price target for SAP to $330, citing mixed results, particularly noting a 12% growth in Cloud & Services, which fell short of the 13% expectation. BMO Capital also adjusted its price target to EUR320, describing the third-quarter results as solid but expressing disappointment in the fourth-quarter guidance. KeyBanc raised its price target to EUR300, highlighting the importance of the upcoming fourth quarter and noting positive management commentary. Oppenheimer maintained a Perform rating, emphasizing the strength of SAP’s cloud business and its contribution to growing profitability. Citizens reiterated a Market Outperform rating with a $375 price target, acknowledging SAP’s strong earnings performance.

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