SAP SE (SAP): A Bull Case Theory

Core Thesis - SAP SE is positioned as a strong investment opportunity due to its transformation into a subscription-driven, cloud-first enterprise, which has reshaped investor valuation of the company [2][5] Company Overview - SAP SE is Europe's largest software company by market capitalization, valued at approximately €288 billion [2] - The company has transitioned from a legacy licensing model to a model focused on recurring licensing revenue, post-implementation support, and consulting/R&D, creating deep customer dependency and predictable cash flows [2][3] Transformation and Strategy - The core of SAP's transformation is the RISE with SAP program, which offers dual-path S/4HANA Cloud migration options, appealing to enterprises seeking both agility and control [3] - Approximately 85% of SAP's revenue is recurring, with cloud revenue projected to reach €21.6–21.9 billion, and the company maintains robust margins at 26.5% [3] Market Position - SAP operates in a €60–75 billion ERP market with high switching costs, facing competition from Microsoft Dynamics 365, Oracle, and Sage, but none match SAP's scale and integration depth [4] - Each S/4HANA migration further entrenches SAP's platform as the operational core of clients' businesses, driving recurring revenue and positioning SAP as essential for AI and data-driven transformations [4] Investment Perspective - The investment narrative for SAP is centered on predictable cash flows, strong pricing power, and customer stickiness, justifying its premium valuation [5] - As enterprises modernize and integrate AI, SAP's cloud and recurring revenue model provide stability and long-term growth potential [5] - SAP is viewed as a strategically essential player in enterprise software, with multiple levers for value creation and limited downside risk due to its entrenched ecosystem [6]