We recently published a list of Jim Cramer Latest Portfolio: 10 Stocks to Buy and Sell. Since SAP SE (NYSE:SAP) ranks 6th on the list, it deserves a deeper look.
Jim Cramer in his latest program talked about how the China factor is affecting US stocks. He said that companies that have exposure to China are getting hammered and he does not see that changing “anytime soon.”
Cramer said that currently there are many “pernicious forces working against the bulls.” The CNBC host said many growth stocks are declining right when interest rates are around the corner. He said that companies that don’t benefit from rate cuts are going down. Cramer also mentioned weak earnings reports which show companies having challenged client bases. Cramer mentioned a consumer products company that was recently hammered because of weakness in China.
Cramer thinks the problem in China is twofold: there’s a government that does not like America or American businesses while the population is “cash-strapped” even if they “like our country.”
Cramer said “China is so darn complicated.” He said at one point the Chinese government was “so business friendly” that Western companies thought it’s “insane” not to go there. But since the Trump administration, the country has been engaged in trade wars with the US.
Cramer said the Chinese government “took advantage of us on trade.”
For this article we watched several latest programs of Jim Cramer and picked 10 important stocks he’s talking about. With each stock we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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SAP SE (NYSE:SAP)
Number of Hedge Fund Investors: 24
Jim Cramer said in a latest program that SAP stock is “incredible.”
“I think SAP is not done going higher.”
SAP SE (NYSE:SAP) is in the news after posting solid Q2 results. Revenue jumped 10% while EBIT exceeded expectations, reaching EUR 1.94 billion, 7% above consensus. Free cash flow came in at EUR 1.3 billion.
The results show that the S/4 HANA migration cycle is bearing fruit and the long-term outlook is also positive.
Ave Maria World Equity Fund talked about this business transition in its first quarter 2024 investor letter:
“SAP SE (NYSE:SAP) provides enterprise application software products worldwide. SAP is successfully transitioning from a perpetual license model to a SAAS model, which we believe will lead to an increase in TAM (total addressable market), higher margins and lower capital intensity.”
SAP SE (NYSE:SAP) restructuring efforts are showing results. In fiscal Q4 its EBIT margin came in at 23.4%, compared with 19.1% in Q2 2023. The company has increased its restructuring provision to EUR 3 billion from the previous EUR 2.2 billion.
The biggest growth catalyst for SAP is AI. AI is now a central part of SAP SE (NYSE:SAP) cloud offerings. About 20% of all deals now include premium AI features, and all ERP and line of business deals had AI in the conversion. SAP SE (NYSE:SAP) talked about the role AI is playing in its business during the latest earnings call:
“Every ERP and LOB deal we closed, our AI strategy played a key role, and AI had a direct impact on our bookings. In the second quarter, almost 20% of all deals included premium AI use cases. And this is just the beginning. Customers have clear plans to expand their AI consumption on their RISE and GROW transformation journeys.
Let me give you some quick updates on our key items in Business AI. Joule is quickly becoming our new user experience, our one front end. We are making our AI copilot an incredible productivity engine for the 300 million people worldwide using our cloud software.”
Read the full earnings call transcript here.
Overall, SAP SE (NYSE:SAP) ranks 6th on Insider Monkey’s list titled Jim Cramer Latest Portfolio: 10 Stocks to Buy and Sell. While we acknowledge the potential of SAP SE (NYSE:SAP) our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
