Just some general thoughts for the thread discussion no Rancor or hostility intended. Recently A number of posts have exposed numerous price targets both up and down based on what I can only believe is "gut" feelings. IMHO this is not the reason to own, buy or sell a stock. I have held SAP for almost as long as IBEXX in the mid 80's. Im still long and continuing my research in the Enterprise industry. I thought I might put some thoughts on electrons so I can get blasted by more knowledgeable people. And at the same time see if the reasonings I hold the stock make sense even to myself.
It seems that SAP has suffered an INDUSTRY setback. All competitors are being bashed basically for the same reason. A lack of growth expectation for the foreseeable future. The fact that all of them are down gives me some comfort in that most industries go in and out of favor (sector rotation,- bp right?!). Should (or when) this area is popular again I have no reason to believe that SAP will not still be a leader in the industry. (Anti SAP holders should chime in here).
It seems that most large companies and a good number of small companies have implemented or soon will implement ERP systems. I have assumed that ERP software has some economic value or advantage to this large group of companies so I submit that in order to compete effectively most companies will end up with some type of ERP software. I expect SAP (or I will sell my stock) will win their fair share of business (I hope more!).
The fear is that everyone already has the software and the market is saturated. I do not claim to know if it is true but ERP hasn't been around that long, so full implementation of all major companies, in all divisions, is unlikely. But as a long term holder of equities Im sure that someday saturation will occur. Afterall how much more market share can Microsoft get on windows xx. So someday most all companies will have some sort of ERP software in order to compete in a local, world or internet economy.
My impression of good companies and management is that they think ahead. As we move closer to a saturation in order for the company to grow they will have to reach out to new markets. Oracle has a great database, yet they suffered for a year or two because their apps etc. were not taking off, where was the new growth going to come from! You need an octopus (hopefully ERP) with alot of tentacles (enterprise portals, data mining, Document control....)kind of industry to continue rapid growth into the future. The progression to Enterprise portals is a natural for any of these ERP companies to continue to expand at 30 40 50%. I submit the stronger companies may find that buying smaller companies expertise and creating suites or integrating industry solutions will allow them HUGE growth for quite awhile. (Until the government says no more!). Obviously there are many other ways to grow, but GROW they can.
I think we have an industry that has a couple of great growth years left. I think we will have new industry offshoots that will eventually be bigger then the original. So, SAP thinks they can double revenues over the next 3 years. I think this growth area can support that. My expectations are that earnings will also go up (or I will sell the stock). The biggest problem I have with SAP is understanding their financials, # of shares, ADRs, accounting principles. Anyone can help here please step in. I think S&P has a range from $6 to .53 for 99 earnings for 11 assorted analysts ($6 ! who is it and can I invite him/her to dinner). the 00 range isn't any better. So in 3 years maybe they earn a couple of bucks. In three years we will be asking the same questions as now. CAN SAP keep growing and keep earning more money. IMHO this industry hasn't even learned all the ways it can grow. So we will probably give it a premium multiple to the market, even higher, if growth becomes very steady. Continued 30% growth, So 30 times earnings, a couple of bucks = 60? In a couple of years? Reasonable fundamentals, double from here. If gorilla title comes back maybe 50 times. YHOO type hype SAP worth 3 times the gross national product for the US.
Now for the problem at hand. All of my contacts say new software sales for 1999 are dead after June this year ( if not already). Y2K testing, no additional software to harm system stability, etc. you've heard them all. I think the most sales forces will take vacation and look longingly at 1/1/00 to start working again. So sales suck but everyone in the business will focus on the turnaround starting 1q 00. The market tends to PREDICT whats going to happen 6 months out. So if I'm right June- Sept should be looking ahead. So all you traders out there, you got a target, a time frame and some reasonings, have fun! Now for anyone thinking of investing remember watching this stock go from 80 to 240? "When it pulls back Im going to get me some of this, cause its a gorilla stock that cant go down." Sometime in the next 18 months IMHO the focus again will be ERP, Portals,profitability of software etc. SAP should still be a leader, Lindybill and growthvalue will argue over fundamentals and gorillas again, IBEXX will again look like a genius, and Michelle will spar with Jon over the real future of the industry. In the meantime, if we can focus WHY you think the stock will go to 26 or 30 or 40 next tuesday We might all benefit from your reasonings. Enjoy all comments have a good weekend. |
