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Investing.com -- Morgan Stanley reaffirmed its Overweight rating and “Top Pick” status on SAP in a note Wednesday, citing reassuring near-term trends from its latest reseller survey and broader channel checks.
"With some elevated nervousness into numbers, we take a more positive view," the analysts wrote.
In its quarterly AlphaWise survey of 30 SAP resellers in the U.S. and Europe, Morgan Stanley (NYSE:MS) noted that overall SAP reseller business growth reaccelerated to 1.1% year-over-year in the second quarter, up from 0.7% in the first quarter.
“Reseller cloud subs growth reaccelerated to +2.6% vs. +0.7%, [and] licence growth also rebounded to +1.4% in 2Q25 vs. -1.0% in 1Q25,” the bank said.
Expectations for the third quarter are said to be even stronger, with resellers projecting overall growth of 1.6%. U.S.-based resellers, in particular, anticipate a rebound to 1.8% growth.
However, full-year 2025 growth expectations were revised down to 3.2%, from 5.4% previously. “While clearly a small negative, we note that FY25 growth expectations as a whole remain higher than reported reseller growth in 2024,” Morgan Stanley said.
Importantly, broader feedback from SAP partners like systems integrators, who have more exposure to large enterprise clients, remains “positive - citing no material changes to customer behaviour or deal activity vs. 1Q.”
Morgan Stanley believes SAP’s key metric, Current Cloud Backlog growth, remains on track. “We do not see material risk to SAP’s important CCB growth leading indicator,” analysts noted, even as consensus expects a modest slowdown to 28% growth ex-FX in Q2.
“Overall, we remain positive into 2Q25 earnings,” Morgan Stanley concluded, “and expect the stock to trade up on an in-line print and guidance reiteration.”