Is SAP a good stock to buy? We came across a bullish thesis on SAP SE on r/ValueInvesting by HatedMoats. In this article, we will summarize the bulls’ thesis on SAP. SAP SE’s share was trading at $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 enterprise application and business solutions worldwide. SAP is positioned as a leading enterprise software company undergoing a long-term transition toward cloud-based revenue, and a discounted cash flow valuation suggests the market may be significantly underestimating its medium-term earnings power. The analysis values SAP at around $155 per ADR at the time of assessment, while a base-case intrinsic value of approximately $260 per ADR implies roughly 40.4% upside, placing the stock in a deeply undervalued category on the investor’s framework.
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The broader valuation range spans a bear case of $141, a base case of $260, and a bull case of $349, highlighting a wide dispersion driven primarily by assumptions around cloud revenue conversion and operating margin expansion rather than discount rate changes. Revenue is expected to grow from €36.8 billion in 2025 to €56.7 billion by 2030 and €71.8 billion by 2035, reflecting a ten-year CAGR of 6.9% supported by cloud backlog conversion, pricing power, and gradual AI monetisation as SAP scales its cloud ecosystem.
Operating margins are projected to expand from 28.5% in 2026 to 33% in the mature phase by 2034, driven by operating leverage, efficiency initiatives, and structural cost discipline despite lower cloud gross margins relative to legacy software. Free cash flow is expected to grow steadily from €8.41 billion in 2026 to €16.84 billion in 2035 as profitability and scale improve, even with normalising working capital benefits. The resulting DCF yields an enterprise value of €257.7 billion, with a terminal value representing about two-thirds of total valuation, making long-term assumptions the key sensitivity.
In the bear case, limited margin expansion and slower growth still justify $141 per ADR, while the bull case assumes stronger execution, higher margins, and faster cloud adoption supporting $349 per ADR. At current levels, the base case implies substantial upside, with valuation primarily hinging on SAP’s ability to sustain cloud transition momentum and achieve mid-30s operating margins over time.