SAP Announces Preliminary Q4 Results Well Surpassing Market Expectations; Maintain EUR 131 FVE

SAP announced preliminary fourth-quarter earnings that came in well beyond market FactSet consensus--with a more subtle beat compared with our expectations. The preview came along with mixed fiscal 2022 guidance--leading us to maintain our fair value estimates of EUR 131 ($152 for the U.S. ADR). This leaves narrow-moat SAP in fairly valued territory in our view. SAP will report fourth-quarter results in more detail on Jan. 27, at which time we are eager to hear profitability factors at play in the quarter in addition to detail on Sapphire Ventures' contribution in the quarter--as the noncore group has been the determining factor in several recent earnings beats for SAP. All in all, we continue to believe that SAP is undergoing a negative moat trend out of vulnerable switching costs in its software offerings amid the ongoing migration of enterprise workloads to the cloud--and we do not consider the significant beat compared with market expectations to be at odds with our thesis.