Is SAP a good stock to buy? We came across a cheap thesis on SAP SE on r/ValueInvesting by HatedMoats. In this article, we will summarize the bull thesis on SAP. A share of SAP SE was $154.90 as of June 29th. SAP’s trailing and forward P/E were 21.89 and 18.59 respectively according to Yahoo Finance.
Computer with charts
SAP SE, together with its subsidiaries, provides business applications and business solutions worldwide. SAP is positioned as the leading business software company undergoing a long-term transition toward cloud-based revenue, and the discounted cash flow valuation suggests the market may be significantly underestimating its medium-term earnings potential. Analysis values SAP at around $155 per ADR at the time of assessment, while the underlying intrinsic value of around $260 per ADR suggests an upside of around 40.4%, placing the stock in the undervalued category of the investor framework.
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The broad valuation range includes a bear case of $141, a base case of $260, and a bull case of $349, highlighting a wide dispersion driven primarily by ideas around changing cloud revenue and operating margin expansion rather than changing the discount rate. Revenue is expected to grow from €36.8 billion in 2025 to €56.7 billion in 2030 and €71.8 billion in 2035, indicating a ten-year CAGR of 6.9% supported by the transformation of the cloud backlog, pricing power, and the gradual monetization of AI as SAP scales its cloud ecosystem.
Operating margins are expected to increase from 28.5% in 2026 to 33% in the maturity phase in 2034, driven by operational strengths, effective initiatives, and structural cost behavior despite lower cloud gross margins relative to legacy software. Free cash flow is expected to grow slightly from €8.41 billion in 2026 to €16.84 billion in 2035 as profitability and leverage improve, even with normal working capital gains. The resulting DCF generates an enterprise value of 257.7 billion euros, with the final value representing almost two-thirds of the total valuation, making long-term projections an important sensitivity.
In the bear case, limited margin expansion and slow growth still justify $141 per ADR, while the bull case assumes strong execution, high margins, and rapid cloud adoption support $349 per ADR. At current levels, the base case suggests significant upside, with valuations largely dependent on SAP’s ability to sustain the momentum of cloud transformation and achieve operating margins in the mid-30s over time.
