SAP: Strengthening Fundamentals, Cloud Momentum, and Attractive Valuation Support Reiterated Buy Rating

Analyst Derrick Wood of TD Cowen reiterated a Buy rating on SAP AG, retaining the price target of $330.00.

Derrick Wood has given his Buy rating due to a combination of factors that indicate strengthening fundamentals and improving demand trends for SAP. His channel checks suggest a solid fourth quarter, including the closing of a roughly $200 million mega deal, recovering slipped deals from earlier in the year, and broad-based momentum across key verticals such as automotive, financial services, and supply-chain oriented industries. He also highlights an acceleration in large deal activity and notes that partners are seeing stronger pipelines and better-than-expected performance, with more partners meeting or exceeding their sales targets and expressing a healthier outlook for 2026. The ongoing shift to the cloud, underpinned by rising RISE migration activity and a more constructive tariff environment, supports his view that SAP is well positioned for sustained cloud growth into 2026 and 2027.
Derrick Wood’s rating is based on his belief that SAP is relatively insulated from AI disruption and instead stands to benefit from AI as a catalyst for cloud adoption, with customers increasingly planning to expand AI-related spending with SAP. Survey work shows SAP gaining mindshare, moving up in net spending intentions rankings and maintaining ERP as a top software investment priority, reinforcing the durability of demand for its core platforms. At the same time, the stock has sold off about 15% since the last quarterly report and now trades at roughly 25x EV/2026E free cash flow, a valuation he views as attractive in light of the improving growth trajectory. Taken together, these dynamics give him increased confidence in SAP achieving its targeted acceleration in cloud and total revenue growth, which underpins his reiterated Buy recommendation.