Tech stock to watch: SAP SE (NYSE: SAP)

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SAP SE (NYSE: SAP) stock rose over 3.6% in the pre-market session of April 9th, 2020 (as of 9:13 am GMT-4; Source: Google finance) after the company announced its preliminary financial results for the first quarter ended March 31, 2020 and lower its FY 20 outlook. During the first quarter, the business activity in the first two months was healthy but towards the end of the quarter, the impact of the COVID-19 crisis had rapidly intensified. As a result, a significant amount of new business was postponed, which led to the significant year over year decrease in software licenses revenue. Therefore, the company has quickly responded to the new environment by adopting a virtual sales and remote implementation strategy. To protect profitability SAP is slowing hiring and reducing discretionary spend in addition to natural savings e.g. from lower travel and virtualized events.

Moreover, in the first quarter, cloud revenue rose 29% year over year to €2.01 billion (IFRS), up 27% to €2.01 billion (non-IFRS) and 25% (non-IFRS at constant currencies). Software licenses revenue declined by 31% year over year to €0.45 billion (IFRS and non-IFRS) and 31% (non-IFRS at constant currencies). Cloud and software revenue posted growth of 7% year over year to €5.40 billion (IFRS), up 6% to €5.40 billion (non-IFRS) and 5% (non-IFRS at constant currencies). Total revenue increased 7% year over year to €6.52 billion (IFRS), up 7% to €6.52 billion (non-IFRS) and 5% (non-IFRS at constant currencies). During the quarter, operating profit had risen by more than 100% year over year to €1.21 billion (IFRS) and up 1% to €1.48 billion (non-IFRS) and down 1% (non-IFRS at constant currencies).

For fiscal 2020, the company expects Non-IFRS cloud revenue to be in a range of €8.3 billion to €8.7 billion at constant currencies compared to the previous range of €8.7 billion to €9.0 billion at constant currencies. Non-IFRS cloud and software revenue is now projected to be in a range of €23.4 to €24.0 billion at constant currencies compared to the previous range was €24.7 to €25.1 billion at constant currencies. Non-IFRS total revenue is now projected to be in a range of €27.8 to €28.5 billion at constant currencies and Non-IFRS operating profit is now projected to be in a range of €8.1 to €8.7 billion at constant currencies

Meanwhile, Jefferies is positive on the stock with a Buy rating. The target price has been revised downwards and is now set at EUR 134 as compared to EUR 137 previously. Alex Zukin from RBC retains his positive opinion on the stock with a Buy rating. The target price is still set at EUR 109. JP Morgan advises its customers to buy the stock. The target price remains set at EUR 125. Mohammed Moawalla from Goldman Sachs retains his positive opinion on the stock with a Buy rating. The target price remains unchanged at EUR 125. Knut Woller from Baader Bank retains his positive opinion on the stock with a Buy rating. The target price is unchanged at EUR 135.

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