HSBC has raised its recommendation on SAP SE to buy from hold while simultaneously reducing the one-year target price to €182 from €187, citing valuation as the primary rationale after the stock’s recent drop.
The brokerage noted that SAP shares closed at €151.16 on April 21, implying roughly 20.4% upside to HSBC’s revised target. HSBC also stated the stock is trading at 59% of its estimated net present value, which it places at €267 per share.
Alongside the rating change, HSBC trimmed its non-GAAP earnings per share estimates for 2026-31 by about 1%, reflecting expectations of weaker growth at peer Oracle’s Fusion cloud ERP and softer anticipated deal activity in March 2026 amid uncertainty tied to the Middle East conflict. The brokerage said its 2026-30 EPS forecasts sit between 4% and 18% below consensus.
For the first quarter of 2026, HSBC expects SAP to report revenue of €9.30 billion, compared with a consensus view of €9.56 billion. The broker projects non-GAAP operating profit of €2.62 billion against a consensus €2.72 billion, and EPS of €1.56 versus a €1.63 consensus.
Despite the downward revisions to earnings, HSBC stressed that valuation was the driving factor behind the upgrade. The firm pointed out that SAP’s price-to-next-12-month earnings ratio of 19.8 times is 41% below its average over the past 18 months.
The brokerage updated its valuation methodology modestly, lowering the target price multiple to a PEG ratio of 1.75 from 1.77, while retaining its 2026-28 EPS compound annual growth rate estimate at 15.1%. HSBC used a 2026 EPS forecast of €6.90 in its valuation.
HSBC attributed much of the recent de-rating in SAP shares to investor concerns that artificial intelligence could displace conventional enterprise software. The brokerage characterized those worries as "unwarranted," highlighting limits to the scalability of AI-based coding tools and the practical challenges of replacing complex enterprise resource planning systems.
"Vibe coding using AI tools works fine for small projects but does not scale well," the brokerage said, adding that implementing a new ERP system would require significant retraining and changes to business processes.
HSBC also pointed to SAP’s deep integration with third-party systems and extensive customer-specific customizations as factors that make wholesale replacement of ERP software difficult.
Taken together, the brokerage’s view is that while SAP faces near-term operational headwinds and some moderation in deal activity, the share price has moved enough to warrant an upgrade on valuation grounds even after modest cuts to earnings forecasts.
Investors will be watching SAP’s upcoming first-quarter 2026 results to see whether revenue, operating profit and EPS align with the broker’s more cautious near-term estimates and whether market concerns about AI and ERP replacement persist.