Deutsche Bank Upgrades SAP AG (SAP) to Buy

March 2, 2009 8:11 AM EST
Deutsche Bank upgrades SAP AG (NYSE: SAP) to Buy, saying the risk-to-reward now favors a Buy after Street lowered expectations.
Deutsche analyst says, "In early 2009 we indicated the fundamental strengths of the business - earnings resilience from maintenance underpinning and cost saving potential. In balance, we perceived a better-entry point arising given we had some concerns Street was too optimistic for Q109. Street has now dropped to -23% for Q109 licence. Hence, the risk-to-reward balance is now strong enough to put SAP on our Buy list...Our forecasts (-20% licences vs prior low of -6% - constant currency) are more cautious than the market and loose management guidance - although we believe we have been notably conservative. Further, our scenario analysis indicates the group could potentially see a drop in licences of -30% in FY09 and still maintain earnings. Critically, the maintenance push-through from 2008 (with some FX help) means top-line should only drop c.3%. Cost-saves providing margin protection means we continue to see SAP as being a rare earnings-growth story through the cycle."
SAP AG together with its subsidiaries (SAP) is engaged in developing and licensing business software solutions.