Stockchase Opinions

The Monthly Gems by Allan Tong Saputo Inc. SAP-T TOP PICK Apr 01, 2025

A month ago, SAP reported its full-year earnings, and EPS of €2.68 beat expectations, but was down from €3.24 in FY 2023. Revenues of €34.2b were 9.5% higher from FY 2023. The main driver was the cloud. In 2024, its cloud backlog leapt 43% year-over-year to €63.3 billion while cloud revenues jumped 25% to €17.1 billion. This included a 33% increase in cloud ERP suite revenues. In terms of AI, SAP has incorporated over 1,300 skills into AI co-pilot which automates 80% of the most-used user activities. 

$25.035

Stock price when the opinion was issued

food processing
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HOLD

Nothing wrong with business, but share price has been weak. Inflation and rising food prices tough on bottom line. Demand for premium brands falling recnetly, but overall a good business. Would recommend holding. Not good for capital appreciation, but safe business. 

HOLD

Seasonality a factor in this stock - performs better in the summer. Large brand with excellent product selection. Expecting share price to go higher. Would recommend holding. $35 share price seems reasonable. 

WATCH

Found support at 2022 levels, which is good, bouncing off. A sign that it's OK, a 5/10 chart, proven it doesn't want to break down any more. Is it going to start going up? Best way to tell is that the last high must be taken out. If yes, it's bullish. If not, it's consolidating. Don't want last lows to be broken. In no man's land, one to watch.

DON'T BUY

He's staying away from consumer staples stocks, unless they have some real edge. With dairy products, hard to get a margin and hard to set price.

DON'T BUY

He is not covering them right now. He is looking for extraordinary stocks priced for growth. This one is OK but there are better places to be.

COMMENT

It has made progress but in the macro environment of inflation in Argentina it has under-performed.

BUY ON WEAKNESS
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

At 13X forward earnings and having a steady growth and margin profile over the years, we think it is getting interesting. It still has some issues to work through related to their Argentina business but this is likely getting priced in at these levels. 
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TOP PICK
Earnings after the bell on Thursday.

Completely unloved today. #1 in Canada, #2 in UK and Australia, #3 in USA. Pre-pandemic, very stable. Food services division hasn't really recovered, especially in the US. Exposed to commodity prices, industry capacity needs to be taken out, cost-cutting needs to continue.

Not as high quality a business as he first thought, but excessive negativity baked into the share price. Yield is 3.2%.

(Analysts’ price target is $31.23)
COMMENT
Trade deal on dairy opens up next year.

Has major operations in Europe, yet it's a Canadian company trading on the TSX. There are issues dealing with dairy and the commodity side of the business.

Lots of pressure within Canada on protected costs around dairy products. Might be an easier place for our government to give in on something, so wouldn't surprise him if our dairy protection weakens or softens a bit.