SAP Tags $60 Stock Price By Hanging On To CRM Market Share

Big upside ahead

SAP stills holds the number one position in customer relationship management (CRM) software market with an estimated share of around 23%. (1) However this share has declined gradually due to increased software-as-a-service (SaaS) offerings from companies like Advanced Micro Devices, Salesforce.com and Oracle.

While we expect SAP’s share to decline to 18% by 2017, the Trefis community predicts flat market share in the 22% to 23% range, corresponding to an upside of 5% to our price estimate for SAP’s stock.

We currently have a Trefis price estimate of $57.49 for SAP’s stock, about 15% above the current market price.

Increasing Adoption of SaaS

Companies like Salesforce.com and Microsoft have increased their SaaS offerings which work on the on-demand principle. With SaaS, enterprises can license only the amount of software required versus the traditional way of procuring the license per device. The service is provided through the Internet and the actual data and IT infrastructure resides with the host rather than the client. Hence the client does not need to bear extra cost of infrastructure and can also start using the solution immediately. SAP has also been slow in adoption of SAP Business ByDesign, a SaaS offering.

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Positive Results from Oracle’s Acquisition of Siebel

Oracle acquired Siebel in 2006 for its CRM offerings. Oracle could not immediately benefit from this acquisition due to the time required for the expected synergies to fall in place and struggled to increase its market share. We expect that Oracle would now be in a position to start benefiting from Siebel’s acquisition, adding another threat to SAP’s supremacy in the CRM market.

Trefis Community Forecast

The Trefis community forecasts that SAP’s market share in customer relationship software will remain within a range of 22% to 23% through 2017, compared to the baseline Trefis estimate of a decrease from 21% to 18% during the same period. The community estimates imply an additional 5% upside to the Trefis price estimate for SAP’s stock, which is already roughly 15% ahead of market value.

Our complete analysis for SAP’s stock is here.

Notes:

1)Estimated based on data from Gartner Research

Trefis members constitute more than tens of thousands of users of the Trefis platform, inclusive of investors, financial analysts, and business professionals who use the Trefis platform to create their own models and price estimates.

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