SAP SE (SAP) — DCF Valuation

SAP trades at $201.53 vs. our DCF-derived intrinsic value of $80.67, implying -66% downside. Using a 9.5% WACC and 10.5% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($115.74) suggests limited upside.

Using a 5-year DCF model: Base FCF of $7.94B, projected at 10.5% 5Y CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-149M net debt and dividing by 1.18B shares: Bear $55.87 | Base $80.67 | Bull $115.74. Current price $201.53 implies -66% to base case.

DCF Methodology:

① Project FCF years 1-5 using 10.5% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($94.64B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 11.9x.