SAP Shares Upgraded To Buy At BofA, 'Hard Work Beginning To Pay Off'

In a report published Wednesday, analysts at Bank of America upgraded

to Buy. The price objective has been raised from €69 to €80. The analysts expect upside to the stock, both in terms of numbers and the multiple. SAP's investments in its product, salesforce and restructuring is likely to offer operating leverage for the company going into H2 and beyond. The restructuring is also expected to provide increasing support to the company's margins. The analysts also expect the company's comps to ease in H2, while also expecting upside to their estimates, driven by the nascent S4HANA product cycle. SAP reported strong results for Q1, with organic growth in cloud bookings of more than 20 percent. Q1 was also the first quarter since 2013 when the company witnessed license growth. "Brazil was a standout, lending credence to mgmt's view that 2014 was weak in part due to a slowdown in EM. While mgmt. did temper optimism on licenses into Q2 this looks in part conservatism, and if SAP can get through Q2, the H2 comps are supportive," the analysts said. Bank of America had downgraded SAP's rating earlier in 2015 due lack of innovation in its core segment and the widening gap between FCF and non-IFRS earnings. However, improvement in these areas has come in the form on S4HANA and large deals that helped drive Q1 results.