The company’s stock, like other tech stocks, has recently been under pressure.
(Photo: Bloomberg/Getty Images)
Frankfurt SAP is making faster progress than expected with the change in business model. In the third quarter, the cloud services business grew by 38 percent to 3.29 billion euros, up 25 percent at constant currency. Sales increased by 15 percent to 7.84 billion euros, adjusted for currency effects by five percent. Both key figures are above the expectations of the analysts.
The transformation has “reached an important turning point,” said CEO Christian Klein at the publication on Tuesday. Thanks to the new cloud customers, who generally pay monthly fees for the products, the share of recurring sales at the software manufacturer has reached 80 percent – an important figure for the stock exchange.
However, the high investments and the change in the business model continue to weigh on profits. The operating result fell from the beginning of August to the end of September by one percent to 1.24 billion euros, excluding currency effects by eight percent. Adjusted earnings per share fell by 36 percent to EUR 1.12. Still, that was more than the financial analysts expected.
In all key figures, SAP benefited from significant exchange rate effects: The USA is the most important market for business software – the conversion of the currently strong dollar into euros is therefore advantageous for the German group.
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Share under pressure for months
In view of the rising interest rates and the uncertain economic outlook, technology providers have been under pressure on the stock market for several months, including SAP. The shares of the German software manufacturer even slipped below the 80 euro mark for a short time this year. In the past few weeks, the price has recovered somewhat, on Monday evening it was quoted at EUR 91.80.
Recently, a report by JP Morgan created new demand for SAP shares. Analyst Toby Ogg assumes that the macroeconomic difficulties are already too heavily priced into the price and that the market is also not correctly assessing the change in the business model. He upgraded the software manufacturer to “overweight” and raised the price target by 10 euros to 115 euros.
More: How SAP wants to build a cloud for the federal government