How Do SAP’s AI Partnerships Influence Its Share Price in 2025?
Thinking about what to do with SAP stock right now? You are not alone. Whether you are holding onto shares after years of market-beating returns or considering jumping in after spotting its recent momentum, SAP is drawing attention from all sides. The story this year has been a bit of a roller coaster, with short-term dips offset by strong long-term gains. Over the last seven days, SAP’s share price edged up by 1.0%, picking up slightly more steam with a 3.6% gain in the past month. Year to date, it is actually down 2.2%, which might surprise some, but looking further back, the stock has rewarded patience. Over three years, the stock is up a hefty 148.1% and nearly doubled over five years, with a 176.9% increase.
Much of this performance can be traced back to SAP’s ongoing transition toward cloud-based solutions and strategic moves in artificial intelligence, both of which have changed how investors view the company’s growth potential. Recent news of new partnerships and expanded AI capabilities has added excitement to the mix, as these developments are seen as catalysts for future expansion rather than signs of raised risk.
As for the big question: is SAP undervalued, fairly priced, or a little stretched at these levels? According to our valuation framework, SAP notches a score of 3 out of 6 possible checks, indicating it is undervalued in half the key measures we track. But, if you want the full picture, stick around. Next, we will dig into the details of how SAP fares across different valuation approaches and present a fresh perspective that can help you make more informed decisions about the stock.
The Discounted Cash Flow (DCF) model is a widely used approach for estimating a company’s intrinsic value. It works by projecting future cash flows the business will generate, then discounting them back to today’s value using an appropriate rate. This lets investors gauge whether a stock’s current price reflects its true long-term earnings power.
In SAP’s case, the current Free Cash Flow stands at approximately €6.44 Billion. Analyst estimates show solid growth ahead, with Free Cash Flow expected to reach about €11.44 Billion by the end of 2027. Projections extend even further, with Simply Wall St extrapolating annual cash flows up to 2035, peaking near €17.09 Billion before discounting. All values use the two-stage Free Cash Flow to Equity method and are denominated in euros (€).
The DCF model calculates SAP’s intrinsic fair value at €249.61 per share. Given the current market price, this reflects an estimated 6.5% discount. Since the margin is relatively slim, this suggests the stock is trading close to its projected cash flow value, neither deeply undervalued nor overvalued.
Simply Wall St performs a valuation analysis on every stock in the world every day (check out SAP’s valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.
For established, profitable companies like SAP, the Price-to-Earnings (PE) ratio is a widely respected tool to gauge valuation. The PE ratio helps investors assess how much they are paying today for a euro of earnings. It is especially valuable when a business is generating consistent profits.
Growth expectations and risk always influence what is considered a “normal” or “fair” PE ratio. Rapidly growing companies can command higher PE multiples, while higher risk or slowing growth may warrant a discount. In SAP’s case, the current PE ratio is 38.4x, which is above the software industry average of 29.7x and also exceeds the average of its closest peers at 36.6x.
Simply Wall St’s proprietary “Fair Ratio” provides another important lens. This metric analyzes not just SAP’s earnings, but also factors in its growth trends, profit margins, risk profile, industry dynamics, and market cap. This approach is designed to give a more tailored and objective gauge of fair value and avoids the traps of simplistic industry or peer comparisons. For SAP, the Fair Ratio currently stands at 41.8x, which is very close to its actual PE. Since SAP’s present PE and the Fair Ratio are nearly in line, this signals the stock is fairly valued at today’s earnings multiple.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, yet powerful way for investors to anchor their decisions in a story. It combines your unique view of SAP’s future (how you think revenue, profit margins, and risks will play out) with a financial forecast and a calculated fair value. Narratives bridge the gap between a company’s story and the hard numbers, making it much more approachable to invest with conviction.
On Simply Wall St’s Community page, Narratives are available to millions of users and make it easy for anyone to assemble their own perspective. You just input your expectations, and the tool instantly shows you the fair value and IRR based on your assumptions, which you can compare to SAP’s current share price to decide whether the stock looks attractive or not.
Importantly, Narratives are dynamic and update automatically as new news or earnings are released, keeping your forecast up-to-date without any manual effort. For example, you can see one SAP Narrative projecting a fair value as high as €345, and another as low as €192, reflecting how investors can interpret the same business in very different ways.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SAP.DE.
