SAP Solid Results Boost Shares, Succession Plan Reassures Street
SAP Solid Results Boost Shares, Succession Plan Reassures Street
(Bloomberg) -- SAP’s third-quarter results were “solid at almost every level,” according to analysts at Oddo, leading the shares to their biggest gain since April and boosting other European technology stocks.
While the departure of CEO Bill McDermott at the end of the year came as a surprise, concern about continuity at Europe’s biggest software company was quelled by the choice of two insiders, Jennifer Morgan and Christian Klein, to replace him as co-CEOs, analysts said.
Shares jumped as much as 8.4%, with analysts at Citigroup noting that expectations for the quarter had been quite low given a weak macroeconomic backdrop. The stock was hurt during the summer following a second-quarter update, with analysts flagging disappointing margins and cloud-booking growth.
Here’s more on what analysts are saying:
ODDO (Nicolas David)
- Departure of CEO “clearly comes as a surprise,” as McDermott just announced “ambitious” 2023 targets and co. is holding CMD on Nov. 12
- 3Q earnings “solid at almost every level” though this was a small quarter helped by easy comparisons
- Questions outlook for 4Q since co. merely reiterated full-year guidance
- Oddo has a reduce rating on SAP with a PT of EU96
JEFFERIES (Julian Serafini)
- Departure of CEO is “sudden” though better-than-expected 3Q results supportive of positive view
- Appointment of Morgan and Klein as co-CEOs a “sign of continuity” for SAP
- With a “clear succession plan in place,” move is unlikely to affect operational execution
- Jefferies has a buy rating on SAP and PT of EU138
CITIGROUP (Walter H Pritchard)
- Management changes are “unexpected” since investor consensus was that CEO McDermott would likely stay through term of contract
- After Morgan took over the Cloud business, co.’s growth engine, and Klein was named COO in 2016, both executives were on investors’ short-list as CEO candidates
- Expectations in 3Q were quite low due to macro and global exposure concerns
COWEN (J Derrick Wood)
- Total revenue and EPS beat expectations, with “strong” operating margin performance
- Revenue and metrics were “a little more mixed under the hood”
- Notes that FY guidance was reiterated and that McDermott is staying on as CEO through year-end
- Cowen has a market-perform rating on SAP ADRs with a PT of $125
--With assistance from Beth Mellor.
To contact the reporter on this story: Kit Rees in London at krees1@bloomberg.net
To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Monica Houston-Waesch, Beth Mellor
©2019 Bloomberg L.P.