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MarketScreener Homepage  >  Equities  >  Xetra  >  SAP SE    SAP   DE0007164600

SAP SE

(SAP)
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SAP : Profit Warning Sends Shares Plummeting

10/26/2020 | 09:40am EST

By William Boston

BERLIN -- SAP SE shares plunged nearly 20% Monday after Europe's biggest tech company by sales scrapped its profit targets for the year and said measures to thwart a rebound in coronavirus infections would weigh on business through the middle of next year.

The biggest intraday drop for SAP shares in 21 years wiped more than $30 billion off the company's market value and put the spotlight on Christian Klein, who became sole chief executive of the business software group in April and since then has announced two profit warnings.

Following a lackluster earnings report for the three months to Sept. 30, Mr. Klein said weak demand from business customers meant SAP would be two years late in meeting its goals to boost revenue from cloud services and increase total sales and profit.

Mr. Klein inherited an ambitious five-year plan to significantly boost profit margins and shift a large part of the company's business from the sale of software licenses, once SAP's biggest revenue stream, to subscription-based cloud services, a more profitable and financially predictable business model that emphasizes recurring revenue.

Now investors must continue to wait for SAP to deliver the economic benefits of the transition.

After the pandemic hit, SAP revised its outlook in April. Now, with a second wave of infections in full swing across mature Western economies, it is having to reconsider its assumption that demand would gradually improve in the second half of the year.

"Obviously, that's not happening," Mr. Klein said Monday.

Lockdowns have been recently reintroduced in some regions and demand is recovering slower than expected. Some core business units, such as its Concur business-related travel service, have been hit hard by the virtual shutdown of corporate travel. And companies are still putting off big investment projects amid the economic uncertainty.

"The warning on the midterm ambitions was expected," Nicolas David, an analyst at Oddo BHF, said. "But the new ambitions are lower than the most pessimistic expectations."

SAP Chief Finance Officer Luka Mucic said investors hadn't fully appreciated that accelerating the shift to the cloud meant a tripling of cloud revenues by 2025 to as much as EUR22 billion, equivalent to $26 billion, laying the foundation for profit growth.

"We are not managing this company for the share price of the day, but rather for long-term growth," he said.

Late Sunday, SAP said it would cut its outlook for the year and delay meeting its broader growth targets until 2025. It now expects unadjusted operating profit of up to EUR8.5 billion this year, down from a previous estimate of up to EUR8.7 billion. The company cut its revenue forecast to up to EUR27.8 billion, down from a previous forecast of up to EUR28.5 billion.

"The increase in profit will still happen, but with a delay," Mr. Mucic said. "Given the fact that we are still guiding for a significant level of profit by 2025, this should result in a rerating of SAP over time."

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

10-26-20 1039ET

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Financials
Sales 2020 27 337 M 33 195 M 33 195 M
Net income 2020 4 706 M 5 714 M 5 714 M
Net Debt 2020 8 595 M 10 437 M 10 437 M
P/E ratio 2020 25,3x
Yield 2020 1,64%
Capitalization 120 B 146 B 146 B
EV / Sales 2020 4,71x
EV / Sales 2021 4,58x
Nbr of Employees 101 450
Free-Float 86,2%
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Technical analysis trends SAP SE
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Mean consensus OUTPERFORM
Number of Analysts 33
Average target price 116,62 €
Last Close Price 100,90 €
Spread / Highest target 59,6%
Spread / Average Target 15,6%
Spread / Lowest Target -29,6%
EPS Revisions
Managers
NameTitle
Christian Klein Co-Chief Executive Officer & COO
Hasso Plattner Chairman-Supervisory Board
Luka Mucic Chief Financial Officer
Juergen Mueller Chief Technology Officer
Lars Lamadé Member-Supervisory Board
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