Brexit Not Likely To Ruin SAP's Q2 Results

The second-quarter results from SAP SE (ADR) SAP are likely to not be impacted by the Brexit vote, according to a note from Barclays analysts, who maintain its Overweight rating on the stock.

"Although the Brexit vote would have impacted the final weeks of the quarter, the early closure of large US and Asian deals, combined with product cycle momentum, should have been enough to push the quarter over the line," analyst Raimo Lenschow wrote in a note.

Lenschow noted that historically, the stock has outperformed during comparable local recessions. The analyst assumes a regional UK recession and European slowdown which is comparable to the impact of the European sovereign debt crisis in 2011–2012.

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Lenschow highlighted that on both occasions, SAP experienced a license drag, but recovered relatively quickly and the overall impact was very different from the prolonged license demise in 2008–2009.

Expectations And Estimates

However, Lenschow said the 2H16–FY17 license outlook has weakened, but can be offset by cost controls.

"Some impact from the changed European circumstances is unavoidable in our view, but active OpEx control could shelter EPS impact and make SAP a relatively defensive. In addition, at 14x FY17E PE, we think the valuation is attractive and we believe the risk of multiple compression is limited," Lenschow added.

As such, the analyst cut FY16 EPS estimate to $4.76 from $4.87 and FY17 EPS outlook to $5.35 from $5.58. Similarly, Lenschow also trimmed the price target by $3 to $105.

At time of writing, ADRs of SAP were down 0.81 percent at $74.36.