Morgan Stanley Cuts SAP Price Targets to €190 and $222, Flags Cloud Risks
Morgan Stanley lowered its price targets on SAP shares to €190 in Frankfurt and $222 for ADRs while retaining an Overweight rating, citing geopolitical headwinds and extended large-scale deal cycles. Its forecast for first-quarter cloud backlog growth was cut to 24% after Q4 deceleration, even as reseller surveys report 8.2% subscription growth.
1. Price Target Revision
Morgan Stanley lowered its price targets on SAP’s shares to €190 in Frankfurt and $222 for ADRs, while retaining an Overweight rating. The cut reflects concerns over geopolitical headwinds and lengthening sales cycles in large-scale cloud transformation deals.
2. Cloud Backlog Forecast Cut
The firm trimmed its first-quarter cloud backlog growth projection to 24% after SAP’s Q4 2025 backlog unexpectedly slowed to that rate. Analysts point to the Middle East conflict and budget approval delays as factors potentially postponing new contract signings.
3. Survey Signals Mixed Demand
An industry survey of 30 SAP resellers showed overall business growth accelerating to 2.2% year-on-year, with cloud subscription growth hitting a record 8.2%. Feedback also highlighted macro uncertainty, budget approval holdups and extended sales cycles on major transformation projects.
4. Phased Deals and AI Adoption
Channel checks with large systems integrators reveal longer sales cycles and back-end loaded phased transformation contracts that could impact near-term revenue recognition. On AI, sentiment remains broadly positive but 80% of customers still hold unused second-year AI credits.