Why SAP SE (SAP) Stock Is Slumping Today

NEW YORK (TheStreet) --  Shares of SAP SE (SAP) are down 3.96% to $74.29 after the enterprise software company said it would acquire Concur Technologies (CNQR) for $8.3 billion, The Wall Street Journal reports. 

The acquisition makes SAP the second-largest enterprise cloud service company behind Salesforce.com (CRM)  . The deal is expected to close in the fourth quarter of 2014 or first quarter of 2015, subject to Concur stockholder approval.

"We have always been focused on making solutions for real customer problems and with SAP we have a great opportunity to advance that mission," said CEO of Concur Steve Singh.

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Cloud services deliver software online to business customers on a subscription basis.

TheStreet Ratings team rates SAP SE as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SAP SE (SAP) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SAP's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for SAP SE is currently very high, coming in at 74.81%. Regardless of SAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.41% trails the industry average.
  • You can view the full analysis from the report here: SAP Ratings Report
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