SAP SE SAP has announced an update to its mid-term financial ambition for 2025. In addition, the company has announced a new share repurchase program with a volume of up to €5 billion.
Driven by strong momentum in the cloud market, SAP now expects cloud revenues of more than €21.5 billion, excluding Qualtrics. The company previously expected cloud revenues of more than €22 billion, which included Qualtrics. This new ambition considers the anticipated divestiture of Qualtrics and an update on SAP's continuing operations for 2025.
SAP's continuing operations for 2025 are expected to be driven by rapid cloud revenue growth, an increasing share of recurring revenues, the value of the support and services business and a favorable currency environment compared to the previous ambition published in October 2020. As a result, the company is increasing its total revenue ambition for continuing operations by about €4 billion in 2025.
SAP SE Price and Consensus
SAP SE price-consensus-chart | SAP SE Quote
The company's updated ambition for 2025 includes total revenues of more than €37.5 billion and non-IFRS cloud gross profit of approximately €16.3 billion compared with the previous projection of €36 billion and €17.6 billion, respectively. Non-IFRS operating profit is anticipated to remain unchanged at €11.5 billion, and expects a free cash flow of approximately €7.5 billion. Additionally, the company expects a share of more predictable revenues of 86%.
SAP's strong business momentum and the expected Qualtrics divestiture have prompted the company to accelerate capital returns. As a result, SAP has announced a new share repurchase program which is expected to start in the second half of 2023 and is anticipated to be fully completed by the end of 2025. This new share repurchase program will be implemented based on the authorization granted by the Annual General Meeting on May 11, 2023, and according to the restrictions set forth therein, added SAP.
Notably, the new share repurchase program is conditional on the successful closing of the Qualtrics divestiture in the second half of 2023. This new share repurchase program is in line with SAP's repurchases of 14 million shares for €1.5 billion in 2020 and around 16 million shares for €1.5 billion in 2022.
In conclusion, SAP’s mid-term financial ambition for 2025 demonstrates the company's strong momentum in the cloud market, and its new share repurchase program reflects its confidence in future growth prospects. These updates are expected to be well-received by investors and may positively impact the company's stock price.
SAP currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 34.5% compared with the sub-industry’s rise of 16.7% in the past year.
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Stocks to Consider
Some better-ranked stocks in the broader technology space are Dropbox DBX, Badger Meter BMI and Blackbaud BLKB, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dropbox’s 2023 earnings has increased 4.8% in the past 60 days to $1.76 per share. The long-term earnings growth rate is anticipated to be 12.3%.
Dropbox’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.4%. Shares of DBX have increased 7.4% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have increased 72.8% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2023 earnings has increased 7.3% in the past 60 days to $3.68 per share.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 10.4%. Shares of the company have increased 21.4% in the past year.
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