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SAP SE ADR SAP

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Stock XNYS Rating as of
$160.09 +0.97 (0.61%)
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As of Delayed Price Post-Trading: $160.72 +0.62
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Company Report

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SAP's Narrow Moat is Vulnerable Amid Cloud Migrations

Julie Bhusal Sharma

SAP is a best-in-breed enterprise resource planning provider and holds dominant market share in global ERP software. However, SAP is phasing out its support of its on-premises ERP software such that by 2040 all of its ERP customers will need to shift to a cloud solution. We think that this vulnerability is a significant threat to SAP’s switching costs, as competitors like Workday offer compelling cloud ERP solutions, while forced migration opens up opportunity to question a company’s best fit for ERP needs. In turn, we believe SAP’s narrow moat, derived from its switching costs, is trending negative. However, it is still early in SAP's transition of on-premises users to the cloud, which leads us to believe its negative trend could be prolonged.

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Price vs Fair Value

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SAP is trading at a 21% premium.
Price
$159.13
Fair Value
$546.00
Uncertainty
Medium
1-Star Price
$623.80
5-Star Price
$98.10
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

SAP should be able to migrate the majority of its on-premises ERP customers to S/4HANA while continuing to add hefty net new customers to the platform.

Bears

SAP’s S/4HANA mandated transition could cause even greater customer churn as customers are forced to reassess their ERP and database providers.

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Trading Information

Previous Close Price
$159.12
Day Range
$158.15–160.36
52-Week Range
$101.78–160.36
Bid/Ask
$147.80 / $167.77
Market Cap
$187.26 Bil
Volume/Avg
810,863 / 830,286

Key Statistics

Price/Earnings (Normalized)
32.46
Price/Sales
5.63
Dividend Yield
1.40%
Dividend Yield (Forward)
1.40%
Total Yield
1.81%

Company Profile

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.
Sector
Technology
Industry
Software - Application
Stock Style Box
Large Growth
Total Number of Employees
105,328
Website
https://www.sap.com

Competitors

Valuation

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Metric
SAP
WDAY
ORCL
Price/Earnings (Normalized)
 32.4651.4721.97
Price/Book Value
 4.0910.75134.30
Price/Sales
 5.6310.176.35
Price/Cash Flow
 27.3235.5518.52
Price/Earnings
SAP
WDAY
ORCL

Financial Strength

Metric
SAP
WDAY
ORCL
Quick Ratio
 1.382.010.73
Current Ratio
 1.552.130.87
Interest Coverage
 2.25−0.063.64
Quick Ratio
SAP
WDAY
ORCL

Profitability

Metric
SAP
WDAY
ORCL
Return on Assets (Normalized)
 7.42%10.37%11.12%
Return on Equity (Normalized)
 12.89%23.20%—
Return on Invested Capital (Normalized)
 11.28%13.74%19.87%
Return on Assets
SAP
WDAY
ORCL

Software - Application Industry Comparables

Screen in Investor
Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
CRM
Salesforce IncLrsb$243.8 Bil
INTU
Intuit IncMjxv$160.0 Bil
NOW
ServiceNow IncPhmb$140.6 Bil
UBER
Uber Technologies IncCzcbsvb$116.0 Bil
SHOP
Shopify Inc Registered Shs -A- Subord VtgBdrhjly$93.5 Bil
CDNS
Cadence Design Systems IncPhlth$74.3 Bil
WDAY
Workday Inc Class AXxbcg$71.2 Bil
DASTY
Dassault Systemes SE ADRMkrlj$62.0 Bil
SNOW
Snowflake Inc Ordinary Shares - Class AGsq$61.9 Bil