SAP Shares Collapse After Lockdowns Force Cuts to Revenue

SAP SE shares dropped as much as 21%, the biggest intraday fall since 1999, after the software company cut its revenue forecast for the full year and said it expects a fresh wave of lockdowns to hurt demand through the first half of 2021.

In a test for Christian Klein, who became sole chief executive officer in April, the pandemic will delay SAP’s goals for cloud revenue, overall sales and operating profit by one or two years, especially in hard-hit industries such as business travel, the Walldorf, Germany-based company said in a statement on Sunday. The drop in shares on Monday wiped 28 billion euros ($33.1 billion) off SAP’s market value.

The drop-off in SAP’s cloud revenue is a sign that companies are putting off making major decisions about updating their software, as the pandemic continues to limit any global economic recovery.

SAP said it expects limited growth and margin improvement over the next two years, and moved expectations to meet its 2023 strategy plan out to 2025. Klein said on a call Monday he expects a conservative recovery into the first half of next year.

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The previous outlook “assumed economies would reopen and population lockdowns would ease, leading to a gradually improving demand environment in the third and fourth quarters,” SAP said in the statement. “Lockdowns have been recently re-introduced in some regions and demand recovery has been more muted than expected.”

The pessimistic short-term outlook from SAP risked a knock-on effect on the European software industry, warned analysts at Citi. Europe’s Stoxx Technology index fell as much as 6.3%, its biggest one-day loss since March.

SAP now expects adjusted revenue of 27.2 billion euros to 27.8 billion euros ($32.2 billion to $32.9 billion) at constant currencies in 2020, lower than the earlier guidance of 27.8 billion euros to 28.5 billion euros. SAP also said it no longer sees a boost from business-travel related revenue this year in its Concur business.

It’s difficult to find positive news in the results, Nicholas David, an analyst at Oddo BHF said Monday. “The warning on the mid-term ambitions was expected/feared by the market but the new ambitions are lower than the most pessimistic expectations,” he said in a note.

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