SAP scores in World Cup, Q2 could miss

As SAP gets ready to announce its Q2 results tonight, it will be basking from the glow of being the 12th man in Germany’s FIFA World Cup winning team.

A German national flag in the city centre of Berlin
Source: Bloomberg

German software giant SAP had created a tool called Match Insights, leveraging its products in the areas of database and analytics, to crunch massive amounts of player performance data.

This included intel on how opposing teams would typically react under pressure, their preferred routes and where the holes in the defence would be.

The tool is currently exclusive to the German team, but SAP has plans to eventually put it on shelves. The company will need to impress investors with the rest of its pipeline.

Need to score with investors

With clients moving toward a cloud adoption model, there are expectations SAP’s license sales growth and operating margins could be under some pressure in the interim.

We saw some signs of this elsewhere when German enterprise software maker Software AG, warned earlier this week that its sales growth would miss expectations. Its clients were delaying signing major contracts, as users lean towards pay-per-use models instead of upfront payments.

We will be looking at SAP for indications of success in its HANA and Cloud products, which will be necessary for its long-term growth in the enterprise software space. There are also some lingering concerns among analysts that the pace of penetration of SAP’s key product, HANA in-memory database, appears to have slowed.

However, without those growth catalysts, SAP investors could be disappointed which could weigh down the stock in the short term.

Ahead of the Singapore Open

Wall Street overnight was largely positive, building on the strong performance of Intel’s earnings which lifted other tech stocks.

However, Singapore stocks could be weighed down by the country’s June non-oil domestic exports (NODX) coming in worse than expected this morning.

Overall, NODX was down by 4.6%, worse than the market consensus of a 2.7% drop, though improving from the 6.6% fall in the previous month. This was dragged down by a 17.4% year-on-year drop in the electronics sector.

We are calling for MSCI Singapore to open lower by 0.45 points to 377.41 points.

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