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On Wednesday, TD Cowen analyst Derrick Wood increased the price target on SAP AG (NYSE:SAP) shares to $315 from $310, while reaffirming a Buy rating on the stock. According to InvestingPro data, SAP, currently valued at $309 billion by market cap, maintains a strong "GOOD" financial health rating. Wood’s assessment comes ahead of SAP’s first-quarter earnings report scheduled for April 22, 2025. Despite mixed signals from a mid-market partner survey indicating less than 50% of respondents meeting or exceeding their targets and a decrease in the forward quarter pipeline, the analyst remains optimistic about SAP’s full-year outlook. This optimism is supported by SAP’s solid revenue growth of 9.51% over the last twelve months and a robust gross profit margin of 73.19%.
The survey findings showed a quarter that might not have met expectations, yet SAP’s RISE program is gaining momentum, and the company’s growth outlook for calendar year 2025 has been increased from 7% to 9%. Wood noted SAP’s historical ability to navigate through economic challenges and mentioned that foreign exchange rates are expected to pose a new obstacle.
For the first quarter, Wood projects a 14% growth in Cloud & Software (ETR:SOWGn), which would represent a decade high, even if there are some risks of underperformance. He anticipates that SAP will maintain its full-year 2025 guidance, which forecasts an 11-13% increase. Looking at the medium term, Wood believes that SAP’s strategy for growth acceleration and margin expansion will likely lead to the stock outperforming its peers.
SAP shares have experienced a decline of approximately 18% since their peak in February 2025, currently trading at around 25 times the expected free cash flow for calendar year 2026. Wood also adjusted the Euro price target to €280, reflecting sector valuation pressures, but raised the U.S. dollar price target to $315, citing foreign exchange favorability. InvestingPro analysis suggests SAP is currently trading above its Fair Value, with a P/E ratio of 86.47x. Investors seeking deeper insights can access comprehensive valuation metrics and 12 additional ProTips through InvestingPro’s detailed research report, available for over 1,400 US stocks.
In other recent news, SAP AG has been the focus of several analyst evaluations and strategic initiatives. BMO Capital Markets adjusted its price target for SAP to $300 from $307, maintaining an Outperform rating due to the company’s strong revenue visibility from cloud conversions. Despite a cautious stance due to broader economic concerns, BMO analyst Keith Bachman expressed confidence in SAP’s free cash flow estimates. Meanwhile, TD Cowen reiterated a Buy rating with a $310 price target, citing SAP’s robust growth prospects and strong European market presence. The firm’s analysts highlighted SAP’s efforts to enhance its position in artificial intelligence as a key factor in its market strategy. Additionally, JMP Securities maintained a Market Outperform rating, with a $330 price target, emphasizing the success of SAP’s RISE and GROW programs in transitioning to cloud-based solutions. SAP’s recent announcement of launching an AI agent service in Japan further underscores its commitment to integrating advanced technologies into its offerings. These developments reflect a continued focus on cloud and AI solutions, with analysts expressing varied levels of optimism about SAP’s future performance.
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