SAP upgraded to Hold at Jefferies after catalysts play out
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Jefferies upgraded SAP (NYSE:SAP) to Hold from Underperform and raised the stock's price target to â¬115 from â¬105.
The analysts said that for nine months they have argued that the update to FY25 targets would disappoint and that the German company looks expensive compared to Microsoft (NASDAQ:MSFT). However over the past month, the update to FY25 targets has come and gone and SAP has moved to a more meaningful discount compared to Microsoft, though it underperformed Euro tech less than expected.
The firm added that now that the catalysts have played out, it has upgraded its rating on SAP's shares to Hold.
The analysts noted that it was flagged that SAP would update its FY25 targets at Sapphire. The company's update boiled down to a 3% downgrade to FCF (-5% adjusting for FX gains). The analysts expected a disappointing update to cause a negative impact on the shares. However, SAP has broadly tracked the Euro tech sector. Meanwhile, U.S. tech companies have performed better.
The firm noted that SAP now trades on a c12% PE/ 18% FCF yield discount to Microsoft. As the catalyst of Sapphire has passed and SAP has moved to a valuation discount to its closest peer, the analysts do not see a reason keep the Underperform rating.
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