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Morningstar’s Analysis

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Economic Moat




We View SAP’s Problems as Company-Specific; Maintaining EUR 90 FVE and Negative Moat Trend Rating

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

In the aftermath of SAP’s disappointing third-quarter earnings report, we continue to believe that the narrow-moat enterprise resource planning and database giant has a negative moat trend prompted by a massive migration of clients to cloud offerings. We view these issues as company-specific and not a function of problems throughout the greater software or IT services industries. We still award a narrow moat rating to SAP, as it benefits from high customer switching costs across its on-premises software, but the company is at risk of higher customer churn as customers look to move from its legacy ERP and database systems to the cloud. We maintain our EUR 90 ($105) fair value estimate. After a 20%-plus decline in SAP’s share price this week, we reiterate our belief that shares are fairly valued.

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Company Profile

Business Description

Founded in 1972 by former IBM employees, SAP provides database technology and enterprise resource planning software to enterprises around the world. Across more than 180 countries, the company serves 440,000 customers, approximately 80% of which are small to medium-size enterprises.

Dietmar-Hopp-Allee 16
Walldorf, 69190, Germany
T +49 6227747474
Sector Technology
Industry Software - Application
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 101,450