Analyst Note| Julie Bhusal Sharma |
SAP reported second-quarter results that were in line with the positive preannouncement from July 8, showing relative resiliency amid the pandemic—largely due to strength in its cloud business. While second-quarter results were not a surprise given the earlier announcement, SAP revealed that it will spin off Qualtrics, the experience management software division that the company acquired less than two years ago for $8 billion. We are holding off on incorporating the spin-off in our explicit forecasts, as SAP has yet to reveal a float rate for the IPO and disclose when this will occur. However, with SAP to remain the majority shareholder in the new listing and expectations for more growth opportunities as a result, we’d expect only marginal impact to SAP’s long-term trajectory. With the outlook for 2020 upheld, we are maintaining our fair value estimate for narrow-moat SAP of EUR 106 per share and raising our estimate for U.S. shares to $124 from $119 due to exchange rates.