SAP Stock Up 50% in the Past Year: Will the Momentum Last?

Core Viewpoint - SAP SE's stock has increased by 50% over the past year, outperforming the S&P 500 and its sub-industry growth rates of 18.6% and 19.8% respectively [1] Financial Performance - SAP's cloud business is a significant driver of its strong financial performance, with a current cloud backlog of €14.8 billion, reflecting a 28% increase [2] - In Q2 2024, SAP's cloud revenues reached €4.15 billion, a 25% year-over-year increase, driven by a 33% growth in Cloud ERP Suite revenues [2] - Cloud revenues from SaaS and PaaS increased by 28% to €4.018 billion, while Infrastructure-as-a-Service revenues declined by 27% to €135 million [2] Market Strength - SAP's cloud business is performing well in various regions, including India, Japan, South Korea, Germany, Brazil, Canada, the United States, Saudi Arabia, and China [3] Product Adoption - The Rise with SAP solution is a key growth driver, helping companies transform their operations and gain market share in cloud ERP solutions [4] - Notable clients adopting the Rise with SAP solution include ExxonMobil, Porsche Informatik, and Shiseido Company among others [5] Future Projections - Management anticipates 2024 cloud revenues between €17 billion and €17.3 billion, indicating a year-over-year growth of 24-27% [7] - Total revenues for 2024 are expected to be between €29 billion and €29.5 billion, reflecting an 8-10% growth [7] - For 2025, SAP expects cloud revenues to exceed €21.5 billion and total revenues to surpass €37.5 billion [8] Strategic Initiatives - SAP is focusing on generative AI advancements, collaborating with IBM and Amazon Web Services to enhance productivity in supply chain solutions [9] - The company is restructuring with an expected total expense of approximately €3 billion to align its workforce with long-term strategies [10] Analyst Estimates - The Zacks Consensus Estimate for SAP's 2024 and 2025 revenues is $36.7 billion and $40.6 billion respectively, indicating growth of 8.8% and 10.6% [12] - The consensus estimate for 2024 EPS is $4.75, with a projected rise of 33.4% to $6.33 for 2025 [12]