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SAP (SAP) plummets 23% on weak guidance and cloud shift
Europe’s biggest tech company SAP (SAP) had its worst day in trading for 26 years on Monday as shares plunged 23% on a weak Q3 report and lower guidance for revenue and forecast for the full year.
Late on Sunday, the German enterprise software group posted a 4% decline in revenue of €6.54bn and a 12% drop-off in operating profits (€1.47bn).
More worrying for investors was a notable cut in its forecasts for FY 2020 after SAP revealed that COVID-19 would continue to negatively impact several divisions, including software licensing, into next year.
SAP is doubling down on cloud-focused growth as it sees revenues climbing to around €22bn, overtaking software sales by the middle of the decade.
However, the transition will be a lengthy one that will pressure profit margins.
“As the CEO of SAP, I have to be focused on the long-term value creation of this company,” SAP chief executive officer Christian Klein said.
The lacklustre report prompted analysts to reassess Europe’s bellwether tech stock.
JPMorgan lowered its rating from overweight to neutral and shaved €40 off a new €120 price target.
Credit Suisse analyst Charles Brennan said that investors were prepared for changes but believes that the margins reset is “larger than expected”.
SAP stock did not fare well in trading on the Frankfurt Stock Exchange on Monday.
SAP cratered after the first bell and eventually closed 22.54% lower at €97.20.
In other stock news, fast food restaurant company Dunkin’ Brands (DNKN) soared 15.28% on the potential of an acquisition by Inspire Brands, though no agreement is yet in place.
There was also a sell-off in aviation as American Airlines (AAL), United Airlines (UAL) and Delta Air Lines (DAL) shares all slipped into negative territory amid a notable rise in COVID-19 cases.
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