SAP GR

SAP SE

TMT


Presented:06/24/2019
Price:€118.82
Cap:$157.97B
Current Price:€209.80
Cap:$272.58B

Presented

Date06/24/2019
Price€118.82
Market Cap$157.97B
Ent Value$147.08B
P/E Ratio43.45x
Book Value€24.44
Div Yield1.25%
Shares O/S1,193.65M
Ave Daily Vol3,305,827
Short IntN/A

Current

Price€209.80
Market Cap$272.58B
SAP SE is an enterprise application software, analytics and business intelligence company, which provides enterprise application software and software-related services. It operates through the following business segments: Applications, Technology & Services and SAP Business Network. The Applications, Technology & Services segment derives its revenue primarily from the sale of software licenses, subscriptions to cloud applications, and related services, which mainly support various professional and premium services, as well as implementation of software products and education services. The SAP Business Network segment emerged from combining all SAP network offerings into one network that covers temporary workforce sourcing, other procurement, end-to-end travel and business travel expense management. The company was founded by Hasso Plattner, Klaus Tschira, Claus Wellenreuther, Dietmar Hopp, and Hans-Werner Hector in 1972 and is headquartered in Walldorf, Germany.

Publicly traded companies mentioned herein: Automatic Data Processing (ADP), Coupa Software Inc (COUP), Microsoft Corp (MSFT), Oracle Corporation (ORCL), SAP SE (SAP; SAP GR), Workday Inc (WDAY)

Highlights

The presenter is long shares of SAP at €118, as he sees the potential for a combination of modest outperformance relative to company guidance and Street expectations on revenue and margins, as well as share repurchase activity, driving an attractive IRR (including the dividend at 1.3% today) looking out to 2023. Also, with Elliott Management in the picture, the risk of SAP making an unwise acquisition has declined meaningfully (i.e., capital will be deployed more effectively over the next few years). If the company can continue to grow its Cloud revenue at ~30%, hold license revenue flat (maintenance revenue should grow), and improve operating margins while buying back stock, €9.30 of EPS is achievable in 2023 (up from a consensus 2019 EPS estimate of €4.88). At 25x forward earnings, which is where SAP trades today, the stock could ultimately trade north of €232.50. 

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Idea Discussion

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