SAP SE (SAP): A Bull Case Theory
We came across a bullish thesis on SAP SE on Rijnberk InvestInsights's Substack by Daan | InvestInsights. As of 7ᵗʰ July, SAP SE's share was trading at $303.72. SAP's trailing and forward P/E were 52.91 and 45.00 respectively according to Yahoo Finance.
An executive in suit presenting a large touch screen of the company's cloud-based enterprise platform.
SAP SE is a global leader in enterprise application software, providing integrated business solutions to over 300,000 organizations across 180 countries. The company has undergone a significant transformation from a traditional software vendor to a cloud-first enterprise platform, driven by its SAP S/4HANA platform. This shift has led to a corresponding change in its revenue model, with cloud revenues expected to represent over 50% of total revenue by 2025. SAP's strong moat, high switching costs, and extensive global reach make it an attractive investment opportunity.
SAP's business model has transitioned to a subscription-based revenue model, with cloud revenues growing rapidly. The company's cloud ERP suite has driven growth, with revenue growing by 33% in Q1. SAP's cloud backlog stands at $18.2 billion, up 29% year-over-year. The company's growth prospects are strong, with management guiding for cloud revenue growth of 26-28% in 2025 and total revenue growth of 10-12%. SAP's recent quarterly results have been excellent, with total Q1 revenue up 11% year-over-year and cloud revenue up 26%.
SAP's valuation is high, trading at 41x this year's expected earnings and 38x EV/FCF. However, the company's strong outlook, competitive moat, and durable business model justify a premium multiple. SAP's focus on enterprise applications sets it apart from Microsoft and Oracle, reducing exposure to commoditized cloud services. While the current valuation makes the risk-reward skew unfavorable, a pullback in the stock price to the €220-€230 range would represent excellent value for long-term investors seeking exposure to a resilient, fast-growing European software leader.
Previously, we covered abullish thesis on SAP SE by FluentInQuality in May 2025, highlighting S/4HANA and its customer base with unusually high stickiness. The stock has appreciated by 3.8% since our coverage. Daan from InvestInsights shares a similar view on SAP SE, emphasizing its transformation into a cloud-first enterprise platform, strong moat, and high switching costs, but with a focus on its software and cloud growth.
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