What Makes SAP SE (SAP) an Attractive Investment?

"SAP SE (NYSE:SAP) is the global leader in enterprise resource planning (ERP) application software, with its flagship Business Suite helping organizations automate and improve operations, supply chains, finances, customer relationships, and partner collaborations. Founded in 1972 and based in Germany, SAP serves over 100,000 customers in more than 120 countries, targeting large enterprises, small-to-medium businesses, government agencies, and educational institutions. The company is broadly diversified by customer, geography, and industry, and generates significant free cash flow from highly recurring, high-margin software maintenance and cloud subscription fees. SAP operates in an oligopolistic industry, enjoying strong pricing power on maintenance, support, and cloud contracts, with 80% of revenue and an even larger portion of profits coming from recurring cloud subscription and software maintenance fees. The enterprise application software market is expected to grow annually at mid-to-high single-digit rates. As clients upgrade to SAP’s cloud solutions, including the S/4 Hana ERP platform, the transition from license to subscription is expected to produce more predictable and substantial recurring cash flows over time. SAP’s recent results demonstrate effective selling of cloud subscription products, with over 25% organic order growth.