By Patrick Costello
SAP (SAP.XE) shares rose sharply Wednesday on the back of better-than-expected first-quarter results and an improved profitability outlook.
The German software company posted a net profit of 1.08 billion euros ($1.21 billion) on a non-IFRS basis in the first quarter, up 25% from the prior year. On an IFRS basis, the company generated a net loss of EUR108 million due to restructuring costs, SAP said.
Operating profit rose 19% to EUR1.47 billion, the company said.
SAP also raised its non-IFRS operating profit target for 2019 to between EUR7.85 billion and EUR8.05 billion, up from an earlier target between EUR7.7 billion and EUR8 billion.
For 2020, SAP said it now targets a non-IFRS operating profit between EUR8.8 billion and EUR9.1 billion, up from between EUR8.5 billion and EUR9 billion. Gross cloud margins should amount to 75% on a non-IFRS basis by 2023, it said.
At 0852 GMT, shares of SAP were up 7% at EUR108.96. The share is up 25% on year.
Analysts at Warburg said SAP's results "topped expectation" at the non-IFRS level, even as the corresponding IFRS figures were negatively hit with restructuring costs.
DZ Bank said it reiterated its buy rating and EUR119.2 price target for SAP in light of its "solid" first-quarter and revised outlook through 2023.
Write to Patrick Costello at email@example.com.