SAP: Q1 13 conference call feedback: specific issues and limited in tim
BUY, Fair Value EUR70 (+21%)
We reiterate our Buy rating and our DCF-derived fair value of EUR70, and reduce our sales ests. and adj. EPS by 2% - but only by 1% on Product (SSRS) sales. While bearish investors point out execution problems as an excuse for software vendors to minimise the sluggish economic environment (Oracle, Tibco, IBM, SAP), we argue SAP’s issues in Q1 13 were specific and limited in time. We consider the negative effects from the government change in China and the sequestration in the US are likely to fade from Q2, yet we are unsure whether a full catch-up may occur by June. With an 11% fall since its highest level in mid-March, we deem SAP’s share price has become attractive, while we contend the story has not changed, with an est. 15% adj. EPS CAGR over the next 3 years.
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