3. SAP SE (NYSE:SAP)
SAP SE (NYSE:SAP) operates as an enterprise application software company worldwide. The company operates through three segments: Applications, Technology & Support, Qualtrics, and Services. As of August 3, SAP SE (NYSE:SAP) has a forward dividend yield of 2.21% which the company supports with trailing twelve-month free cash flows of EUR 4.29 billion.
On July 21, SAP SE (NYSE:SAP) released earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.98 and generated a revenue of $7.67 billion, beating Wall Street expectations by $168.52 million.
Wall Street is bullish on SAP SE (NYSE:SAP). On July 22, Deutsche Bank analyst Johannes Schaller adjusted his price target on SAP SE (NYSE:SAP) to EUR 115 from EUR 120 and reiterated a Buy rating on the shares. On July 26, UBS analyst Michael Briest maintained his Buy rating on SAP SE (NYSE:SAP) and revised his price target on the stock to EUR 107 from EUR 132.
At the close of Q1 2022, 19 hedge funds held stakes in SAP SE (NYSE:SAP). The total value of these stakes amounted to $1.42 billion. This is compared to 14 positions in the previous quarter with stakes worth $1.64 billion.
As of March 31, Fisher Asset Management is the most prominent shareholder in SAP SE (NYSE:SAP) and owns over 8.77 million shares of the company. The investment covers 0.57% of Ken Fisher’s 13F portfolio.
Here is what Polen Capital had to say about SAP SE (NYSE:SAP) in its “Polen Global Growth Fund” first-quarter 2022 investor letter:
“In our opinion, SAP is demonstrating that their cloud transition and RISE with SAP strategy are working. We added to our position upon evidence that CEO Christian Klein’s strategy is bearing fruit, and the stock trading down to an attractive valuation during the quarter. The strategy and sell-off are connected, and we believe it provided an opportunity for long- term shareholders. The company recently reported weak 2022 margin and FCF guidance. This was expected if cloud growth accelerated – which it has. Current cloud backlog has accelerated to a mid-20% growth rate, and the S/4 HANA Cloud Backlog and Cloud Sales have accelerated as well. Cloud, which tends to be a very sticky business with high recurring revenue, is now a >$10bn business and represents roughly 40% of sales.
Our research shows this should only increase over the next five years. If management continues to successfully execute its strategy, the transition should create a mechanical lift to margins and greater levels of FCF. We believe SAP is a durable business led by capable management that is poised to deliver high-quality mid-teens earnings growth over the next five years.”
