SAP is a German manufacturer of enterprise software that simplifies the management of internal processes. The company has more to gain from easing quarantine restrictions than many other tech firms. Thanks in large part to SAP Concur, a platform for managing business trips and related expenses. At the moment, SAP shares are trading 20% below their maximum values.
In 2021, Wall Street expects EPS growth to reach $6.23, which means that the forward P/E ratio is 22.3 x – quite acceptable figures for this kind of company. Especially when you consider the fact that SAP tends to show better results than expected from it. One of the drivers of growth is the move to "cloud" technologies. It happens a little late, but given the huge number of products already available, this step should bring tangible benefits. Management expects that by 2025, cloud revenue will increase to 22 billion Euros. For comparison, by the end of 2021, this figure should be 9.2-9.4 billion Euros.
In the first quarter, SAP's revenue decreased by 3% y/y, to 6.30 billion Euros. The dynamics in the foreign exchange market and quarantine restrictions had a negative effect on the indicator. The opening up of the economy and, in particular, the normalization of corporate life will allow the company to return to growth again. It is important to note that despite the difficulties, the gross margin increased by 250 basis points, to 72.3%. Thus, the work on improving the efficiency of SAP continues.