SAP (SAP) is a top German company that operates the biggest Enterprise Resource Planning (ERP) solution globally. ERP helps companies plan their processes across key sectors like human resources, supply chain, procurement, and customer service.
SAP is used by thousands of companies globally. Most of its customers use SAP High-Performance Analytic Appliance (HANA), a leading in-memory database and data management platform.
It has also become a leading company in the business artificial intelligence (AI) industry, where it automates most processes like marketing, human resources, and procurement.
Its business is dividend into Cloud ERP, Human Capital Management, Spend Management, Customer Experiences, and Industry Cloud.Â
SAP is listed in the United States and in Germany, where it belongs in the blue-chip index. It is the biggest company in Germany followed by Siemens, Deutsche Telekom, and Allianz.
It has achieved this growth both organically and through acquisitions. Some of its biggest acquisitions were companies like Concur Technologies, SuccessFactors, Ariba, and Qualtrics. It recently acquired WalkMe, in a $1.5 billion deal.
SAP stock was trading at $226 while its HypeIndex metric soared to 223%.
Positive hype
SAP has demonstrated years of solid revenue growth, helped by the strong demand of its ERP and cloud solutions. Its annual revenue has soared from €27.5 billion in 2019 to over €31 billion last year. Most of this growth was organic since it has not implemented any large-scale acquisition of late.
SAP, like Microsoft and Amazon, is seen as a top success in the artificial intelligence industry. Its focus is on enterprise AI, which is expected to have robust growth in the long term.
SAP is also the biggest -or the only - large-scale cloud computing company in Europe, giving it a priority when European companies are selecting providers.
The company’s business is doing well, with its backlog rising to €14.8 billion in the last quarter, a 28% annualized increase.
Its quarterly revenue rose by 10% to $8.2 billion while its cloud revenue surging to $7.1 billion. This growth was mostly because of its business artificial intelligence division.
SAP is continuing to reduce its share count as it implements a €5 billion share repurchase program through December next year.Â
It is also working to grow its margins. In September, it announced a plan to lay off between 9,000 and 10,000 workers. Most of these layoffs will be in the form of voluntary leave and internal re-skilling. The restructuring cost will cost about €3 billion.
SAP expects its business to continue doing well, with its cloud revenue rising by 27% to €17.3 billion. Total revenue will be €37.5 billion.
Negative hype
SAP is one of the most overvalued companies in the tech industry. It has a forward P/E ratio of 84, higher than the sector median of 29. It also has a forward EV-to-sales multiple of 6.80, higher than the industry median of 2.85.
SAP’s hefty valuation contrasts its relatively slow revenue and profitability growth in the past few years. It has a forward revenue growth metric of 7.10%.
The company is facing substantial competition from other companies like Oracle, Microsoft, Infor, and Workday. Its cloud division has faced strong competition from the likes of Microsoft and Amazon.
With the stock trading at $226, it is only a few points below the average analyst estimate is $234.5.Â
SAP stock analysis
On the daily chart, the SAP share price started the year at $158.80, and then soared to a record high of $231 in September.
The stock has formed an ascending channel pattern shown in green. It has also remained above all moving averages, while the two lines of the MACD indicator have formed a bearish crossover indicator.Â
Therefore, the stock will likely continue rising as long as it moves above the key resistance point at $231. If this happens, it could rise to the key point at $250.
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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.
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