Tuesday, FBR Capital Markets upgraded SAP AG (SAP) shares to Market Perform from Underperform with a price target of $44.
Analyst David Hilal upgraded the stock as the stock has achieved his price target. Since the analyst's downgrade almost a year ago, SAP shares have underperformed the FBR Enterprise Software Index, Nasdaq, and S&P 500.
The analyst believes the CEO shakeup earlier this week highlights the concerns he has about the company's: dependence on large application deals, failure to execute on its mid-market strategy with Business ByDesign, and inability to roll out its enterprise support program.
The analyst believes that a series of strategic miscues has hurt the company's market position, customer satisfaction, and employee morale. While the analyst believes a change of leadership was necessary, he is less convinced that the new co-CEOs are the best choice.
The analyst does believe the renewed focus on product development is a good move, as the company has lost ground in innovation to Oracle and software-as-a-service vendors. However, the analyst believes meaningful change will take time at SAP, and he continues to believe that the near term will be rough sailing for the company. The analyst maintained his price target of $44, which represents 13x his 2011 pro forma EPS estimate.
Currently, SAP is up $0.55 or 1.27% and trading at $43.84.
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