SAP Earnings: Transactional Revenue Weighs Down Results, but Shares Nearing Our Fair Value

SAP reported second-quarter results shy of expectations, as transactional revenue related to discretionary offerings—such as business expensing via Concur—performed worse than management was bracing for. SAP narrowed outlook ranges for the year slightly. We are maintaining our fair value estimate of EUR 119 per share ($132 for U.S. ADR shares given current exchange-rate changes) for this narrow-moat name, as we believe transactional revenue will be able to recover after the near-term macro slump. With shares down about 6% upon results, shares are approaching our fair value estimate. As a result, we recommend holding on to shares for the time being.