SAP SE, a leading German multinational software corporation that provides enterprise software to manage business operations and customer relations is set to release its first-quarter 2023 financial results on April 21. As the market anticipates the report, analysts have projected a modest year-over-year increase in earnings per share, primarily driven by strong demand for the company’s products and services, particularly in the cloud business.
According to the Zacks Consensus Estimate, SAP is expected to report revenues of $7.97 billion, a 0.4% increase from the year-ago quarter. Meanwhile, earnings are projected to be $1.21 per share, representing an 8% YoY increase.
In the previous quarter, SAP’s cloud business was a significant contributor to the company’s growth, with total revenues on a non-IFRS basis amounting to €8.436 billion ($8.614 billion), up 6% YoY. The company’s cloud backlog, a key indicator of go-to-market success in cloud business, also increased by 27%.
SAP’s ongoing restructuring plan, including the sale of its entire stake in Qualtrics to Silver Lake and Canada Pension Plan Investment Board, is expected to align its operating models with its accelerated cloud transformation. Furthermore, the company’s latest offering, Grow with SAP, which is designed for midsize customers to adopt cloud ERP, could boost speed, predictability, and innovation.
Despite these positive developments, macroeconomic weakness, geopolitical instability, and softness in software licenses are still major headwinds for SAP. Additionally, stiff competition in the cloud space and increasing research and development and sales and marketing expenses are concerns that the company needs to address.
Technical Analysis:
SAP SE price action has been trending higher consequently curving out a channel chart pattern despite overall bearish markets. The upward momentum has been stable because price action has stayed above the 50 and 20 key moving averages. Currently, price has been consolidating between 128.78-125.84 for twelve days. Anticipate price to probably encounter resistance on the upper trendline of the channel if it breaks out above the range or if price breaks below the range, it will most probably encounter key support at 122.83 which is a confluence point with the 38.2% fib level and lower trendline of the channel.
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Dennis Mwenga.
Market Analyst – HF Educational Office – Kenya
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