Potential Downside to SAP’s Share in Supply Chain and CRM Markets

Aug. 8.10 | About: SAP AG (SAP)

SAP (NYSE:SAP) competes with Salesforce.com (NYSE:CRM) and Microsoft (NASDAQ:MSFT) in the supply chain software and customer relationship management (CRM) software markets. We currently have a Trefis price estimate of around $50 for SAP’s stock, about 7% above the current market price of around $47.

Trefis members have created forecasts for two key drivers of SAP’s stock over the last week: (1) SAP Market Share in Supply Chain Software and (2) SAP Market Share in Customer Relationship Software. The members’ forecasts suggest that SAP Market Share in Supply Chain Software will trend slightly below the Trefis estimate, while SAP Market Share in Customer Relationship Software will roughly be in line. These projections suggest a combined downside of 1-2% for SAP’s stock.

We estimate that CRM software accounts for around 15% of the $50 Trefis price estimate for SAP’s stock while supply chain software constitutes around 11%. Hence SAP’s stock is quite sensitive to (1) SAP Market Share in Supply Chain Software and (2) SAP Market Share in Customer Relationship Software. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.

1. SAP Market Share in Supply Chain Software

The average of forecasts for SAP Market Share in Supply Chain Software created by Trefis members indicated a projected increase from around 22% in 2010 to around 23% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from around 23% in 2010 to around 25% by the end of the Trefis forecast period. The member estimates imply a downside of 1% to the Trefis price estimate for SAP’s stock. In the past, SAP Market Share in Supply Chain Software has increased from 19% in 2005 to 22.5% in 2009.

Disagree? You can drag the forecast trend-line above to express your own view, and see the sensitivity of SAP’s stock to SAP Market Share in Supply Chain Software.

Our complete analysis for SAP Market Share in Supply Chain Software is here.

2. SAP Market Share in Customer Relationship Software

The average of forecasts for SAP Market Share in Customer Relationship Software created by Trefis members indicated a projected decrease from around 22% in 2010 to around 18% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of a decrease from 22% in 2010 to close to 19% by the end of the Trefis forecast period. The member estimates imply small downside to the Trefis price estimate for SAP’s stock. In the past, SAP Market Share in Customer Relationship Software has decreased from 26% in 2005 to around 22% in 2009.

Disagree? You can drag the forecast trend-line above to express your own view, and see the sensitivity of SAP’s stock to SAP Market Share in Customer Relationship Software.

Disclosure: No positions