SAP stock rating upgraded at TD Cowen, price target raised

On Friday, SAP AG (NYSE:SAP) received an upgraded stock rating from TD Cowen analysts, moving from Hold to Buy. The firm also increased SAP's price target to $305.00, up from the previous target of $240.00. This change reflects a positive outlook on the company's performance and future prospects. With a current market capitalization of $304.8 billion, InvestingPro analysis indicates the stock is trading above its Fair Value, with technical indicators suggesting overbought conditions.

TD Cowen's analysts highlighted SAP's robust stock appreciation and growth execution throughout 2024, expressing confidence in the continuation of this trend. The company's impressive performance is evident in its 67.3% return over the past year and 8% revenue growth. The upgrade was influenced by encouraging survey data, which indicated a significant increase in the prioritization of Cloud ERP systems. This shift suggests that artificial intelligence (AI) is becoming a key driver for enterprise resource planning (ERP) migrations.

The analysts anticipate that SAP's growth acceleration, coupled with margin expansion, will continue through 2027. They expect these factors to exert further upward pressure on the company's valuation. According to TD Cowen, the combination of SAP's growth and margin improvements positions the company favorably for the future. InvestingPro data reveals a robust 72.9% gross profit margin and a strong financial health score, supporting this optimistic outlook. Discover 15+ additional exclusive insights about SAP with an InvestingPro subscription.

SAP's commitment to innovation and the integration of AI into their cloud ERP offerings appears to be resonating positively with the market. TD Cowen's revised price target and stock rating upgrade reflect their expectation of SAP's sustained growth and the potential for an increased valuation.

Investors and market watchers will likely monitor SAP's performance closely, considering TD Cowen's optimistic projections. The company's strategic focus on cloud-based solutions and AI integration is set to play a pivotal role in its trajectory over the coming years. For comprehensive analysis and detailed insights, access SAP's full Pro Research Report, available exclusively on InvestingPro.

In other recent news, SAP AG has seen several significant developments.

TD Cowen recently upgraded SAP's stock rating and raised the target to $305, forecasting operational margins to increase from 23% in 2024 to 29% in 2026. This is anticipated to support a two-year compounded annual growth rate of approximately 26% in constant currency for operating profit.

In contrast, CFRA downgraded SAP AG from Buy to Hold, citing valuation concerns despite advancements in AI and cloud technologies. The firm maintained a 12-month target price based on a P/E of 35.1 times their 2026 earnings per share projection.

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.

Analysts from JPMorgan and Jefferies have maintained an overweight and Buy rating for SAP, respectively. JPMorgan pointed to SAP's solid balance sheet and a compound annual growth rate profile in the vicinity of 20%, while Jefferies highlighted the company's strong performance amidst a challenging environment.

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