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#SAP stock plunges 20 percent as COVID-19 hits profit outlook

#SAP stock plunges 20 percent as COVID-19 hits profit outlook

German software giant SAP saw its stock price collapse Monday as it slashed its yearly financial targets while predicting lasting damage from the coronavirus pandemic.

SAP’s Frankfurt-listed shares sank as much as 20.8 percent to 98.88 euros ($116.86), putting one of Europe’s most valuable tech firms on track for its worst day in more than two decades. Its New York-listed stock tumbled more than 21 percent in premarket trading to $118.00 as of 8:59 a.m.

The rout came after SAP warned investors Sunday that recovery in demand for its business software products has been “more muted than expected” as spikes in COVID-19 infections led to renewed lockdowns in some countries.

As a result, SAP cut the high end of its operating profit outlook for 2020 by 200 million euros to 8.5 billion euros, or about $10 billion, while its top revenue estimate dropped from 28.5 billion euros to 27.8 billion (about $32.8 billion).

“SAP’s poor [third-quarter] results and weak outlook suggest that a recovery for on-premise software vendors could take longer than anticipated, as clients continue to delay major IT upgrades,” said Bloomberg Intelligence analysts Anurag Rana and Gili Naftalovich.

Walldorf, Germany-based SAP also provided a more gloomy outlook for the coming years, saying it expects the virus to continue to weigh on demand through at least the first half of 2021. The company scrapped previous strategic goals it had planned to meet in 2023 and set new targets it hopes to reach in 2025.

SAP says it plans to lean into its cloud-computing business now that the pandemic has sped up its customers’ shifts to using those services.

“COVID-19 has created an inflection point for our customers,” CEO Christian Klein said in a statement. “The move to the cloud combined with a true business transformation has become a must for enterprises, to gain resiliency and position them to emerge stronger out of the crisis.”

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