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SAP’s Goal: Stock Price Of 110 Euros

Fifteen financial analysts have recently made predictions about SAP’s stock price. The majority still recommends a purchase, and one analyst even predicts that SAP’s stock price will reach 122 euros.

SAP CEO Bill McDermott promised shareholders a market value of roughly 300 billion euros in the next three to five years. As things stand, this would mean that SAP would somehow have to triple its market value. Even with a stock price of 122 euros, this seems impossible.

In an interview with German magazine “Manager” in January this year, Bill McDermott explained that his prediction for SAP’s stock price was really just simple math. For one or the other SAP customer, this might be reminiscent of “Run Simple”.

Bill McDermott wants to triple cloud revenue and double overall revenue as well as profit. In 2032, SAP’s CEO wants a revenue of 100 billion – or so he said in 2012.

Right now, it doesn’t really look like a simple success story. With layoffs and early retirement programs, Bill McDermott tries to improve his overall margin. Roughly 4,500 employees will get the axe worldwide; financial experts believe that SAP’s margin will consequently only improve by 0.1 percent.

With the current layoffs happening all around the world, SAP is losing many valuable employees with unique Hana and Abap knowledge. In California, an entire Hana development with 250 experts was fired some weeks ago.

Why would SAP do that? Because of its stock price

A lot of its platform problems are still unsolved. Database Hana is fascinating, but far from robust or stable enough for daily ERP operation. SuccessFactors, an HR cloud which SAP had acquired some years ago, is still waiting to be seamlessly integrated into SAP’s core.

Only a few experts understand SAP’s technological side in its entirety. No wonder, then, that so many financial analysts predict that SAP’s stock price will rise above 100 euros. What’s surprising, however, are their justifications.

They mostly state that SAP’s financial strength lies in its software licenses. And it’s true: SAP can tweak its own licensing model as it pleases, like it did with Indirect Access. Through simple changes of the model, SAP can therefore force its customers to pay even more for their licenses.

The business report and the recent stock market situation look satisfactory and even promising. This might be why the supervisory board of SAP, in alignment with the executive board, has decided to recommend that shareholders approve a dividend of 1.50 euros per share for the fiscal year 2018. This represents a year-over-year increase of 0.10 euros, or 7 percent compared to last year’s dividend of 1.40 euros.

“With our strong growth in 2018, our shareholders should participate in this success. Therefore, we are recommending a 7 percent increase in dividend,” said Luka Mucic, SAP’s CFO. “We appreciate the support of our shareholders as we steer our company toward sustainable and profitable growth and deliver on our purpose of helping the world run better and improving people’s lives.”

What only few people know: the real figures, internally reported figures, are sad and concerning compared to rival companies.

Source:
E-3 Magazine April 2019 (German)

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E-3 Magazine

Articles published through E-3 Magazine International. This includes press releases by our partners as well as articles and reports from the E-3 team of journalists.

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