SAP stock has surged 65% YTD, driven by cloud pivot and strong outlook

From Nasdaq: 2024-12-06 04:02:00

SAP stock has seen a year-to-date gain of 65.3%, outperforming its sub-industry, sector, and the S&P 500 composite. The pivot to cloud has been a key driver behind this growth. SAP is a leading provider of ERP software headquartered in Germany.

SAP’s cloud business is thriving, with solutions like Rise with SAP driving significant traction. Strategic acquisitions and collaborations are also boosting its cloud offerings. The company plans to expand into the mid-market through partner ecosystems. Cloud backlog surged 25% in Q3, with cloud revenues up 25%.

Management has raised its outlook for 2024, expecting strong growth in cloud and software revenues. SAP is heavily investing in AI integration across its product suite, with around 30% of cloud orders including AI use cases. However, declining software license revenues and rising costs remain concerns.

SAP stock is currently trading at a premium valuation. While the company has growth opportunities in the cloud and AI space, mixed estimates revision activity and external risks warrant caution. Long-term investors may hold, but new investors should approach with caution. Consider other tech stocks like PLXS, IDCC, and WDAY.

PLXS, IDCC, and WDAY are better-ranked tech stocks with strong growth potential. PLXS and IDCC have a Zacks Rank #1, while WDAY has a Zacks Rank #2. These stocks have shown positive earnings estimates revisions and strong performance in the past year. Consider these options for investment opportunities.



Read more at Nasdaq: SAP Skyrockets 65% YTD: How Should Investors Play the Stock?