Summary
Analysts at Piper Sandler said in a note dated Tuesday that European enterprise software stocks are being re-evaluated as companies confront the challenge of monetizing artificial intelligence within an uncertain macroeconomic backdrop. The firm lowered ratings and trimmed outlooks for several vendors, highlighting slower cloud conversions, a faster-than-anticipated shift from SaaS models to AI usage-based monetization, and regional economic vulnerabilities.
Downgrades and company specifics
Germany's SAP was downgraded from "overweight" to "neutral" and its price target was cut to 170 from 220. Piper Sandler's analysts pointed to cloud conversion progress that has lagged expectations as a key driver of the change, particularly with a 2027 milestone on the horizon. They noted that chief information officers are prioritizing AI adoption, which in some cases has taken precedence over traditional enterprise resource planning migrations.
The note highlighted SAP's concentration in Europe, the Middle East and Africa - regions that represented roughly 46% of the company's fiscal 2025 revenue - leaving the company exposed to regional macroeconomic risks. Analysts flagged a recent oil shock as a factor that could raise inflation and weigh on growth in Europe.
Sector dynamics
Piper Sandler described the industry as moving through a "SaaS to AI transition" on a condensed timetable. While vendors increasingly explore usage-based AI monetization models, analysts cautioned that meaningful revenue contributions from those initiatives are likely to take time and that visibility into future targets remains limited. Valuation multiples across the sector are being revised downward amid heightened focus on profitability and stock-based compensation.
Specifically for SAP, the firm's estimate for fiscal 2026 constant currency cloud backlog growth was trimmed to 23% from 24%. Even so, analysts said the "data gravity" inherent in ERP systems should help support SAP's competitive position over the medium term.
Collaboration software: Asana and Monday.com
Collaboration-focused software companies also faced downgrades. Asana and Monday.com were each lowered to "neutral," with price targets set at $7 and $85, respectively. The collaboration segment is under greater scrutiny as seat expansion slows and overall growth moderates.
Piper Sandler noted that Asana's exposure to the technology sector could see efficiency gains from advanced AI models, a dynamic that may in turn limit seat growth. Monday.com has issued guidance for fiscal 2026 revenue growth of 18.3%, which the analysts said is below prior consensus expectations of 20.5%.
Valuation tools
The note also posed whether SAPG is a bargain at current levels and referenced a Fair Value calculator that applies a mix of 17 valuation models to help assess potential upside and relative value for SAPG and other names.