Enterprise software company SAP is Investor's Business Daily's Stock Of The Day as the software maker breaks out from a double-bottom base holding a stellar relative strength line. Despite market volatility, SAP stock has outperformed most software peers in 2025.
On the stock market today, SAP stock rose 2.7% to close at 285.35. In addition to selling database software, Germany-based SAP sells business relations and customer management software. Wall Street analysts have focused on the software maker's progress in converting its on-premise customer base over to cloud computing services.
Like Oracle, SAP is moving away from software-license sales to subscription-based cloud services. Software makers typically recognize on-premises license fee revenue up front when contracts are signed. Subscription-based cloud revenue is recognized over time.
Upcoming Analyst Day
Listed on the New York Stock Exchange, SAP hosts an analyst day on May 21. At the event, it's expected to update long-term financial goals and business strategy.
On IBD's MarketSurge technical charts, SAP stock owns a "blue dot." The RS Line Blue Dot list identifies stocks whose relative strength lines are hitting highs, while the stock is building a new base or breaking out past a buy point.
Investors should look for blue dot stocks with a solid Composite Rating and with good liquidity. SAP has both, although trading volume has been running average.
Meanwhile, the double-bottom base looks sort of like the letter W. It features two distinct sell-offs. Having formed a double-bottom base, SAP stock holds an entry point of 280.44, according to MarketSurge.
In 2025, SAP stock has advanced about 16%. SAP pulled back from an all-time high of 293.70 set in mid February.
Meanwhile, the iShares Expanded Tech Software exchange traded fund — composed of many of the major enterprise software players — is down 5% for 2025.
Some analysts have been expecting software companies to lower their financial outlooks when they report earnings in April and May.
SAP Maintains Full Year Guidance
Ahead of the SAP earnings report on April 22, analysts were concerned about the company's U.S. federal business, currency exchange rates and the impact of Trump administration trade tariffs on its customer base.
Amid growing worries over a global economic downturn, the Germany-based company maintained its outlook for the fiscal year. That drove a rally in SAP shares.
"We believe SAP is well positioned for low-teens top-line growth through 2027, in line with our previous assumption, due to cloud revenue growth of 26% to 28% in 2025 and similar levels in 2027," said Angelo Zino, analyst at CFRA Research, in a report to clients.
"In our view, the combination of cloud and software sales will drive 11% to 13% annual growth in highly recurring revenue streams over the next three years, leading to mid-teens free cash flow growth as cloud scale benefits materialize."
For the quarter ending March 31, SAP earnings came in at 1.44 euros per share (about $1.56 as of March 31) on an adjusted basis. Also, revenue climbed 12% to 9.01 billion euros (about $9.75 billion). Analysts had estimated adjusted EPS of 1.31 euros per share on revenue of 9.06 billion euros.
Cloud computing revenue rose 27% to 4.99 billion euros vs. estimates of 5.04 billion euros.
SAP reports its own financial metric called Current Cloud Backlog, or CCB. It refers to the amount of revenue a software company expects to recognize in the future from contracts with customers. In Q1, CCB rose 28% to 18.2 billion euros, in line with views.
"We remain constructive on SAP's ability to weather through choppy economic macro conditions and for the business model to continue to see growth acceleration alongside ample margin expansion," TD Cowen analyst Derrick Wood said in a client note.
SAP Stock Technical Ratings
Further, SAP stock holds an IBD Composite Rating of 96 out of a best-possible 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Also, SAP stock has an Accumulation/Distribution Rating of C. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying, E means heavy selling. Think of the C grade as neutral.
Meanwhile, the average true range, or ATR metric available on IBD's MarketSurge charting tool offers some guidance amid market volatility. It gauges the characteristic breadth of a stock's behavior.
Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
In the current, unpredictable market, IBD generally suggests stocks with 21-day ATRs of 3% or below. SAP stock's ATR is 3.59%. But many stocks are much higher.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
