Tag Archives: sap

SAP’s Strong Pipeline Into Q2 Keeps Stock Near Recent High

While SAP ( SAP ) late Friday preannounced Q1 earnings and revenue that missed Wall Street views, investors Monday were buoyed by the German enterprise software company’s assurances that its pipeline is flowing strongly into Q2. SAP stock was up a fraction, near 77, in afternoon trading in the stock market today, just 7% off an 18-month high of 82.70 set July 25. In its release Friday, SAP CEO Bill McDermott said he expects “increasing momentum” in 2016. Shares of rival  Salesforce.com ( CRM ) were down a fraction Monday afternoon, but rival  Oracle ( ORCL ) was up a fraction. With final Q1 results scheduled for release April 20 before the open, SAP issued preliminary earnings of 0.64 euros per share minus items (73 cents at Monday’s exchange rate), up 9%, where Wall Street analysts expected 0.70 euros. It said revenue rose 5% to 4.73 billion euros (or $5.39 billion), short of the 4.85 billion euros and 4.82 billion euros that Evercore ISI and Wall Street projected, respectively, observed Evercore ISI in a research note. One euro was worth about $1.14 Monday. In a research note Sunday, Evercorse ISI analyst Kirk Materne said he’s looking for “more color” from SAP on April 20,  but “we expect the (Q1) license shortfall and comments around a slower start in the Americas are going to pressure shares on Monday despite SAP reiterating its full-year guidance and the comments around a ‘strong (Q2) pipeline.’ ” Materne maintained a buy rating on SAP stock, but said “we continue to favor Oracle ( ORCL ) and Microsoft ( MSFT ) in  mega-cap software.” RBC Capital Markets analyst Ross MacMillan maintained a sector perform rating on SAP stock but lowered his price target to 78 from 81. MacMillan noted that SAP’s Q1 cloud bookings of 140 million euros rose 22% year over year, and more than 25% in constant currency. “We view this as slightly disappointing” following Q4’s 75% “organic growth,” less than 50% in constant currency, “although do note that (Q1) is a seasonally weak quarter,” MacMillan said. “SAP also added over 500 new S4HANA customers, of which around 30% (i.e. about 150) are net new. While well below about 1,400 customer adds in (Q4), we would expect (Q1) to be seasonally weaker.” He said weakness in the energy sector and “some pull forward of demand” in Q4 due to S4HANA product promotions drove SAP’s softness in Q1. “As a result, we think there is limited read-through for other companies in enterprise software.” Got that, Salesforce.com sellers? “SAP’s fundamental growth drivers are rock solid, from our best-in-class S4HANA applications to our completeness of vision in the cloud,” said SAP’s McDermott in Friday’s release. “We expect increasing momentum as the year progresses, fully consistent with our guidance for the full year. SAP continues to be a highly profitable growth company.” HANA is SAP’s linchpin business software suite. CFO Luka Mucic said the Americas, dragged by Brazil, “got off to a slower start.”

Workday May Hit $5 Billion In 5 Years As Financial Software Rises

At the rate Workday ( WDAY ) is growing its core human capital management (HCM) software, combined with its new financial management products, analysts Ross MacMillan and Matthew Hedberg can see Workday’s path to $5 billion in yearly sales by 2021. The company just hit it first billion-dollar year, closing its fiscal year ended Jan. 31 with sales of $1.16 billion. The pair of RBC Capital Markets analysts on Sunday raised their price target on Workday stock to 92 from 72 and affirmed their outperform rating. Workday stock rose a fraction Monday to a 2016 high, making its seventh consecutive up-day, closing at 78.92. Last week, Workday stock broke out of a cup-with-handle at a 75.60 buy point. Workday wasn’t alone Monday. Rival ServiceNow ( NOW ) rose 3.6%  to 64.28 on a bullish report from William Blair on its long-term fundamentals. Bigger enterprise software rivals Salesforce ( CRM ), Oracle ( ORCL ) and SAP ( SAP ) all slipped a fraction. RBC’s MacMillan and Hedberg drew confidence by comparing Workday to PeopleSoft in 2001, four years before its HCM and financial management (FM) software businesses were acquired by Oracle for $10.4 billion. PeopleSoft co-founder David Duffield, who fought the Oracle takeover, went on to co-found Workday. “A look back at PeopleSoft is striking,” they said. “Workday today has (less than) 25% of PeopleSoft’s customer count in 2001, yet Workday has (more than) 50% of PeopleSoft’s revenue at that time. This is particularly interesting, given Workday has yet to generate any meaningful financial management revenue today and which (according to management) was (more than) 50% of PeopleSoft’s revenue at the time of acquisition by Oracle.” In other words, the RBC analysts say, Workday has plenty of room to grow. “Success in financials would support a path to $5 billion,” they wrote. “While financials (are) not the focus in this note, we think the path to $5 billion revenue remains underpinned (split less than 50% HCM, more than 50% FM) which we think can be realized in the next 5-plus years.” For its fiscal 2016 ended Jan. 31, Workday revenue rose 48% to $1.16 billion. It lost 1 cent per share minus items, a huge improvement from a 33-cent loss in fiscal 2015. Analysts polled by Thomson Reuters expect a Q1 per-share loss minus items of 2 cents, on revenue up 35% to $339 million. They expect adjusted profit to break into the black in Q3.

Workday Financial Software Heading For ‘Success’; Stock Gains Again

Building momentum from a week of positive trade, cloud software developer Workday ’s ( WDAY ) stock gained another 1% Friday morning — nearly 8% for the week — after FBR Capital Markets satisfied itself that Workday’s financial software may “achieve the same level of success as (or greater than) its HCM (human capital management) product suite.” In a research note issued Friday, FBR analyst Samad Samana said that he visited Workday’s Pleasanton, Calif., headquarters in Silicon Valley this week and cornered Betsy Bland, vice president of financial management products, and Robynne Sisco, chief accounting officer, who let him “dig deeper into what we have found to be the single most important issue on investors’ minds.” The issue: Will Workday’s financial software do great? “We walked away more confident that the financials business is positioned to have a strong (fiscal 2017) as the product suite has improved significantly, more WDAY reps are now selling financials, a critical mass of live customers is providing positive references for potential customers, and the willingness to adopt cloud-based financials has increased,” Samana said. Investors responded by pushing Workday stock up 2% to 78.34 before easing back to a 1.6% gain above 78 by midday in the  stock market today . On Wednesday, Workday stock broke out of a 12-week, first-stage cup-with-handle base with a 75.60 buy point. Workday competes against no shortage of rivals, including SAP ( SAP ), Salesforce.com ( CRM ) and legacy software developer Oracle ( ORCL ). Salesforce stock was up 1.6% to 74.98 at midday Friday, and Oracle was up fractionally at 40.96. But SAP stock was down 0.8% to 79.74. Samana said he learned that Workday had added more than 45 financial software customers in the fiscal fourth quarter ended Jan. 31, “the most ever in a single quarter.” At 207 financial customers, it’s more than double the base of a year before. For Q4, Workday earnings beat Wall Street views, but its Q1 revenue outlook missed estimates. For fiscal Q1, ending in April, analysts polled by Thomson Reuters expect Workday to lose an adjusted two cents per share minus items, flat with a year earlier, on revenue up 35% to $339 million. Workday went public in October 2012, priced at 28.