SAP SE (SAP:GR)
12-month performance: -17%
Insider activity: Bullish
Insider buying pattern: Purchases from CEO, CFO and Chairman
Recent news: Revenue and profit forecast cut
When multiple top-level insiders purchase stock in their own company within a short span of time, investors should take note. This buying pattern – which is called ‘cluster buying’ – is one of the most powerful signals in insider transaction analysis.
In this report, we are going to flag some interesting cluster purchases at SAP SE (SAP:GR). Headquartered in Walldorf, Germany, SAP is the largest European software company by revenue with presence in more than 180 countries and 100,330 employees worldwide. The company is listed on the Frankfurt Stock Exchange and currently has a market capitalisation of €122 billion.
SAP: insider buyingAn analysis of insider transaction data reveals that on 26 and 27 October, five different insiders at SAP purchased stock.
On 26 October, CEO Christian Klein, CFO Luka Mucic, elected employee representative Lars Lamede, and Founder and Chairman of Supervisory Board Hasso Plattner all purchased stock.
Plattner’s purchase is what stands out the most. Our records show that Plattner purchased 2.46 million SAP shares at a price of €101.30 per share. The total cost of the purchase was just under €250 million. It is worth noting, that Mr Plattner has often been recorded selling SAP shares, the buying activity from the Founder of SAP was last seen in December 2015.
On 27 October, CEO, Mr Klein added another 1,000 shares, taking his total spending to just over €200,000 in two days. The CTO, Juergen Mueller, and the Chairman of the Works Council, Ralph Zeiger, also purchased stock on 27 October.
The pattern of insider buying is worth highlighting for a few reasons. Firstly, these are top-level insiders that bought stock. It is likely that Luka Mucic and Christian Klien have strong insight into the company’s recent performance as both have been a part of SAP for more than 20 years.
As per 2iQ data, Mr Mucic has a long-term trading IQ of 102 which means he times his purchases well. Similarly, Juergen Mueller’s short-term IQ is 97 which is evident through his last purchase in last week of May when he purchased shares at €111 and the stock rose to €122 in a period of 30 days – a rise of 10%.
Secondly, the insiders bought a substantial amount of stock. Plattner’s purchase was enormous. Overall, these purchases represent the largest amount of insider buying at SAP for several years. This indicates that insiders are very confident that the stock is undervalued at present.
Reduced revenue guidance
SAP recently announced that it had cut its revenue forecast for the year as it expects the demand to be impacted negatively by another wave of coronavirus lockdowns. The company said that it no longer anticipates a meaningful recovery in SAP Concur business travel-related revenues for the remainder of the year 2020. This announcement caused the share price to drop by around 20% – the largest one-day fall since 1999. Nearly €30 billion was wiped off the company’s market capitalisation.
The insider buying we have observed here suggests that top insiders at SAP such as the such as the CEO, Chairman, CFO and CTO expect the share price to bounce back. Given the size of the purchases, and the fact that multiple insiders have purchased stock, we see this insider buying activity as a bullish signal.