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Widespread supply chain issues, inflation, rising crude prices and geopolitical instability in Europe are roiling the U.S. and global equity markets. Recently, the Federal Reserve hiked interest rate by 75 basis points.
In such a scenario, growth-rated stocks like SAP that have strong fundamental drivers can be appropriate investment picks.
SAP also has the favorable combination of a Growth Score of B and a Zacks Rank #2. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 and a Growth Score of A or B offer attractive investment opportunities.
The stock is down 37.9% from its 52-week high level of $151.48 reached on Sep 1, 2021, making it more affordable for investors. The stock has a dividend yield of 2.2%.
SAP has an impressive earnings surprise history. The company outpaced estimates three of the trailing four quarters, delivering an average earnings surprise of 19.8%. The stock has long-term earnings per share (EPS) growth expectation of 5.9%.
The Zacks Consensus Estimate of $1.19 per share for the second quarter of 2022 earnings has moved up 5.3% in the past 60 days.
Solid Fundamental Drivers
Germany-based SAP is one of the largest independent software vendors in the world and the leading provider of enterprise resource planning (ERP) software. Its solutions cater to the organizations’ needs, ranging from small and medium businesses to large, global enterprises.
SAP’s performance is gaining from strength in its cloud business, especially the new Rise with SAP solution. In the last reported quarter, on a non-IFRS basis, the cloud and software business (85.6% of total revenues) registered revenues of €6.06 billion, up 12% year over year (up 7% at cc). Cloud revenues were €2.82 billion, up 31% year over year on a non-IFRS basis (up 25% at cc).
SAP posted total revenues, on a non-IFRS basis, of €7.077 billion ($7.941 billion), up 11% year over year (up 7% at constant currency or cc).
Driven by continued momentum in its cloud operations, SAP anticipates cloud revenues in the range of €11.55-€11.85 billion, suggesting an increase of 23-26% at cc for 2022.
Cloud and software revenue is now expected to be between €25 billion and €25.5 billion, calling for a 4-6% rise at cc.
Momentum in SAP’s Business Process Intelligence platform, particularly the S/4HANA solutions and steady traction witnessed in SuccessFactors Employee Central, Ariba and Fieldglass, Qualtrics and other cloud-based offerings is noteworthy.
Moreover, SAP follows an open ecosystem strategy, enabling it to leverage its innovation capacity better by extending it to partners. This drives better customer value based on respective domain expertise. The SAP partner ecosystem is a collaborative, innovative and interactive network of partners, customers and individuals. Backed by the company’s extensive global relationships, customers have a wide range of providers and resources for software-related services and support.
Other Stocks to Consider
A few other top-ranked stocks from the broader technology sector worth consideration are InterDigital (IDCC - Free Report) , Avnet (AVT - Free Report) and Vishay Intertechnology (VSH - Free Report) . While Avnet and InterDIgital sport a Zacks Rank #1, Vishay Intertechnology carries a Zacks Rank #2.
The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.
Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average 5%. Shares of VSH have declined 18.2% in the past year.
The Zacks Consensus Estimate for InterDigital 2022 earnings is pegged at $3.33 per share, up 46.1% in the past 60 days. IDCC’s long-term earnings growth rate is pegged at 15%.
InterDigital’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 141.1%. Shares of IDCC have lost 17% of their value in the past year.
The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.
Avnet’s earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average being 21.2%. Shares of Avnet have grown 6.5% in the past year.
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Here's Why SAP Is an Attractive Investment Bet for Investors
SAP SE (SAP - Free Report) is one stock investors may consider adding to their portfolio to combat the highly volatile market environment and make some gains from its upside potential. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Widespread supply chain issues, inflation, rising crude prices and geopolitical instability in Europe are roiling the U.S. and global equity markets. Recently, the Federal Reserve hiked interest rate by 75 basis points.
In such a scenario, growth-rated stocks like SAP that have strong fundamental drivers can be appropriate investment picks.
SAP also has the favorable combination of a Growth Score of B and a Zacks Rank #2. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 and a Growth Score of A or B offer attractive investment opportunities.
The stock is down 37.9% from its 52-week high level of $151.48 reached on Sep 1, 2021, making it more affordable for investors. The stock has a dividend yield of 2.2%.
SAP SE Price
SAP SE price | SAP SE Quote
SAP has an impressive earnings surprise history. The company outpaced estimates three of the trailing four quarters, delivering an average earnings surprise of 19.8%. The stock has long-term earnings per share (EPS) growth expectation of 5.9%.
The Zacks Consensus Estimate of $1.19 per share for the second quarter of 2022 earnings has moved up 5.3% in the past 60 days.
Solid Fundamental Drivers
Germany-based SAP is one of the largest independent software vendors in the world and the leading provider of enterprise resource planning (ERP) software. Its solutions cater to the organizations’ needs, ranging from small and medium businesses to large, global enterprises.
SAP’s performance is gaining from strength in its cloud business, especially the new Rise with SAP solution. In the last reported quarter, on a non-IFRS basis, the cloud and software business (85.6% of total revenues) registered revenues of €6.06 billion, up 12% year over year (up 7% at cc). Cloud revenues were €2.82 billion, up 31% year over year on a non-IFRS basis (up 25% at cc).
SAP posted total revenues, on a non-IFRS basis, of €7.077 billion ($7.941 billion), up 11% year over year (up 7% at constant currency or cc).
Driven by continued momentum in its cloud operations, SAP anticipates cloud revenues in the range of €11.55-€11.85 billion, suggesting an increase of 23-26% at cc for 2022.
Cloud and software revenue is now expected to be between €25 billion and €25.5 billion, calling for a 4-6% rise at cc.
Momentum in SAP’s Business Process Intelligence platform, particularly the S/4HANA solutions and steady traction witnessed in SuccessFactors Employee Central, Ariba and Fieldglass, Qualtrics and other cloud-based offerings is noteworthy.
Moreover, SAP follows an open ecosystem strategy, enabling it to leverage its innovation capacity better by extending it to partners. This drives better customer value based on respective domain expertise. The SAP partner ecosystem is a collaborative, innovative and interactive network of partners, customers and individuals. Backed by the company’s extensive global relationships, customers have a wide range of providers and resources for software-related services and support.
Other Stocks to Consider
A few other top-ranked stocks from the broader technology sector worth consideration are InterDigital (IDCC - Free Report) , Avnet (AVT - Free Report) and Vishay Intertechnology (VSH - Free Report) . While Avnet and InterDIgital sport a Zacks Rank #1, Vishay Intertechnology carries a Zacks Rank #2.
The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.
Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average 5%. Shares of VSH have declined 18.2% in the past year.
The Zacks Consensus Estimate for InterDigital 2022 earnings is pegged at $3.33 per share, up 46.1% in the past 60 days. IDCC’s long-term earnings growth rate is pegged at 15%.
InterDigital’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 141.1%. Shares of IDCC have lost 17% of their value in the past year.
The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.
Avnet’s earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average being 21.2%. Shares of Avnet have grown 6.5% in the past year.