SAP Beats Q3 Expectations, Analysts Expect 'Big Cash-Flow Ramp In 2025'

Shares of SAP SE SAP continued to rise in early trading on Tuesday after the company reported its third-quarter results.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

KeyBanc Capital Markets On SAP

Analyst Jackson Ader reaffirmed an Overweight rating, while raising the price target from $230 to $270.

SAP delivered another quarter of more than 30% Cloud ERP growth and accelerated organic growth in constant currency terms, Ader said in a note. Current cloud backlog (CCB) grew 29%, up from 28% in the second quarter, he added.

"FX headwinds actually caused the reported number to miss estimates, but we believe investors will look through that to see the positive momentum," the analyst wrote. Although the company's Ambition 2025 targets have moved higher in recent quarters, they "continue to be de-risked," he further stated.

JMP Securities On SAP

Analyst Patrick Walravens reiterated a Market Outperform rating, while lifting the price target from $245 to $300.

SAP's quarterly results were strong, with revenue and earnings slightly beating consensus estimates, Walravens said. Revenue growth of 10% year-on-year was flat versus the previous quarter, while cloud growth and current cloud backlog growth accelerated to 27% and 29%, from 25% and 28% in the second quarter, he added.

The company held its cloud revenue guidance for 2024 unchanged at €17.0 billion to €17.3 billion, while raising its cloud and software revenue outlook to €29.5 billion to €29.8 billion, from its previous forecast of €29.0 billion to 29.5 billion, the analyst stated. SAP reiterated its 2025 outlook of more than €37.5 billion in total revenues, over €21.5 billion in cloud revenues and €10.2 billion in operating profits, he said.

Check out other analyst stock ratings.

Oppenheimer On SAP

Analyst Brian Schwartz maintained a Perform rating on the stock.

SAP's top-line growth reaccelerated in the quarter, while cloud revenue and cash generation outperformed, and the commentary around big deals was strong, Schwartz said. The company has generated more than €1 billion in free cash flows in every quarter in 2024 and "remains on-track for its 2025 free cash flow guidance," he added.

The analyst stated, however, that SAP's current cloud backlogs look softer than in recent quarters, "which suggests deal volume may have underwhelmed, though the growth rate remains strong." "SAP's accelerating Cloud ERP revenue and 3Q results lend support to the benefits of an ERP modernization cycle, where SAP sits in a leading position, and a big cash-flow ramp in 2025," he further wrote.

Piper Sandler On SAP

Analyst Brent Bracelin said that SAP delivered an acceleration in ERP Suite growth to 36% year-on-year from 32% six months ago. This was the fourth quarter of improving Cloud Backlog growth in constant currency, he added.

The enterprise spending tailwinds "could be more SAP company-specific vs. the broader SaaS industry poised to moderate for the third straight year," the analyst stated. OneStream Inc OS and BlackLine Inc BL could benefit due to exposure to the SAP ecosystem, he added.

SAP Price Action: Shares of SAP were up 1.4% to $232.75 at the time of publication on Tuesday.

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