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Investing.com -- Wells Fargo (NYSE:WFC) has begun research coverage of SAP (NYSE:SAP) (ETR:SAPG) stock with an Overweight rating and a €345 price target, highlighting a unique blend of defensive and growth characteristics that position the company well amid macro uncertainty.
The broker’s analysts describe SAP as offering the “best of both worlds,” highlighting the German software giant’s ongoing cloud transition and dominant Enterprise Resource Planning (ERP) position as core strengths.
They argue that “cloud migration momentum” is driving both a reacceleration in growth and the potential to close the earnings margin gap with large-cap software peers.
Wells Fargo estimates that over 80% of consensus net new cloud revenue between 2025 and 2027 could come from existing customers migrating to the cloud, making the growth outlook less dependent on new clients.
The bank also sees SAP’s legacy strength as defensible, noting that its foothold in product-centric industries, especially manufacturing and supply chain, has enabled it to maintain more than 20% global ERP market share.
“Additionally, our fieldwork speaking with customers & partners indicates the 50-yr-old business, despite being late to cloud, has made meaningful strides competitively and is now willing & able to defend its territory,” analysts led by Michael Turrin added.
In its note, Wells Fargo points out SAP’s transformation from a legacy on-premise vendor to a cloud-first company. This shift, along with greater use of low-touch channels and partner ecosystems, underpins their forecast for SAP to reach operating margins above 30% and free cash flow margins of 25% by 2027.
SAP’s shares currently trade at 35x enterprise value/free cash flow (EV/FCF) on Wells Fargo’s next-twelve-month (NTM) estimate. Wells Fargo’s €345 price target on the stock implies a 30% upside and is based on a 38x EV/FCF multiple, in line with peers.
“SAP stands out as a defensive horizontal story with vertical (or at least idiosyncratic) traits likely to resonate in a fluid tape,” analysts concluded.