Marcin Jasinski @MJ_Lux: "💻 $SAP has pulled back..."

Poland

💻 $SAP (SAP SE ADR) has pulled back roughly 25–30% from its recent highs, but the fundamentals tell a very different story. What we’re seeing looks much more like a market reset than a business slowdown, and that disconnect is where the opportunity is starting to build. 💶 Looking at FY2025 results released in January 2026, SAP delivered €33.4B in cloud and software revenue, with total revenue reaching €36.8B (+8% YoY) and cloud revenue growing ~23% annually. Even more importantly, SAP’s cloud backlog climbed to €77.3B (+22% YoY), giving the company strong multi-year visibility into future revenue and reinforcing the strength of its recurring model . As management noted, this backlog growth has “laid a strong foundation for accelerating total revenue growth through 2027.” 📈 Profitability is also accelerating. SAP generated €10.4–10.7B in operating profit and €8.2B in free cash flow in 2025, nearly doubling free cash flow year-over-year. Looking ahead, the company is guiding toward ~€10B in free cash flow for 2026, alongside €11.9–12.3B in operating profit and 23–25% cloud revenue growth . This combination of growth and cash generation is a key driver of long-term valuation upside. ☁️ At the core of the story is SAP’s continued transition to S/4HANA cloud ERP, which is driving more predictable revenue, improving margins, and strengthening customer retention due to the mission-critical nature of its software. AI is also becoming a major growth lever, with SAP confirming that AI was included in roughly two-thirds of Q4 cloud deals, further embedding the company into enterprise workflows and digital transformation. 📊 Looking forward, expectations from major data providers like Bloomberg and FactSet point to steady earnings growth in the low-to-mid teens, supported by cloud expansion and operating leverage. At the same time, analyst sentiment remains strongly positive. Recent aggregated price targets are around $ 340+, with the majority of analysts maintaining Buy ratings, implying potential upside approaching ~70–75% from current levels depending on execution and multiple expansion. 📄From a price perspective, SAP has corrected from highs above $ 300 to the ~$ 170 range following a broader software sector reset, including a ~15% post-earnings drop despite strong results . The longer-term trend remains intact, and this type of pullback often creates high-conviction entry points in fundamentally strong companies. 🏡As a company headquartered in Germany, SAP benefits from a strong industrial and economic base while generating the majority of its revenue globally. This provides both stability and diversification, which is particularly valuable in today’s macro environment. ⚙️There are still risks to monitor, including the pace of cloud adoption, short-term margin pressure, and broader tech sector volatility. However, given SAP’s scale, recurring revenue base (now over 85% predictable revenue mix), and strong cash flow generation, these risks appear manageable. 💰In summary, SAP is a high-quality enterprise software leader executing well on its cloud transformation, with strong financial momentum, improving visibility, and powerful long-term tailwinds. With fundamentals strengthening and analyst targets pointing to substantial upside (potentially ~70%+), the current setup looks like a compelling buying opportunity. $SAP.DE $GER40 $NSDQ100 $SPX500

Not investment advice. The author may have financial interests in the mentioned instruments.