SAP Reports Record Cloud Performance

German software company SAP (SAP) reported Q4 and full-year 2021 results that showed strong performance in its cloud business. The company went on to issue upbeat guidance for 2022.

For Q4 2021, SAP reported a 6% year-over-year jump in revenue to 7.98 billion euros, driven by a 28% increase in cloud revenue to 2.61 billion euros. It posted adjusted EPS of 1.86 euros, marking a 10% improvement from the same quarter in the previous year.

For full-year 2021, SAP reported a 17% jump in cloud revenue to 9.42 billion euros, hitting the high end of the company’s internal expectation. Total revenue rose 2% to 27.8 billion euros. Adjusted EPS for the full year increased 25% to 6.74 euros.

2022 Outlook

The company expects growth in its cloud business to continue accelerating. As a result, it anticipates cloud revenue in the band of 11.55 billion euros to 11.85 billion euros in 2022. SAP explains that the pace and scale of the cloud momentum put it on track toward its mid-term ambitions. The company aims to achieve more than 22 billion euros in cloud revenue by 2025, with total revenue exceeding 36 billion euros.

Share Repurchase Program 

SAP plans to buy back 1 billion euros worth of its shares starting in February through December 2022. The company ended 2021 with 8.9 billion euros in cash after spending about 2.2 billion euros in dividend distributions during the year. SAP ranks among the highest dividend stocks in its category, yielding 1.2% compared to the sector average of 0.69%.

Analysts’ Take

Following SAP’s earnings report, Oppenheimer analyst Brian Schwartz maintained a Hold rating on SAP stock without assigning it a price target. The analyst is cautiously optimistic about SAP’s cloud opportunities and potential to drive more revenue growth in 2022 and 2023. Further, Schwartz says that margins are expected to decline in 2022 and sees few near-term catalysts.

Consensus among analysts is a Moderate Buy based on 2 Buys and 2 Holds. The average SAP AG price target of $162.50 implies 32.78% upside potential to current levels.

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