SAP vs. MSFT

8 нояб. 2023 г.

SAP shows a strong correlation to MSFT, which on the surface is not very surprising. But comparing fundamental data and the general company profile can lead to some raised eyebrows.

In my view MSFT appears to be a much stronger company, which should have little problems capitalizing on the current AI hype for growth and also overall has a much more ubiquitous product portfolio.

Meanwhile, the ongoing strength in the chart of SAP appears perplexing and one cannot help but wonder what are the fundamental catalysts for these moves are. My assumption is that SAP is currently simply riding the wave as perceived similarity to MSFT. While SAP has a higher dividend yield it shows much less potential for future growth. Its P/E ratio also appears quite exaggerated. I believe the similarity to MSFT is only skin deep.

Unless something fundamentally changes, my hypothesis is that we are due for a correction in XETR:SAP. Now the RSI on the daily chart indicates overbought conditions, so we can use this opportunity to initiate a medium term short trade. It will be difficult to get the timing right for an put options trade, but we can enter in increments if the trade starts going against us.

First price target for taking profits is 120 with a expiration date before earnings in January 2024.

If you want to hedge the risk, you could also buy MSFT calls to cover the upside potential.