By Brian Swint

SAP, the German maker of business software, has become Europe's largest company after stock gains of about 20% so far this year.

As it hosts a conference for analysts on Monday in Orlando, Florida, the big question will be how long this spectacular run can last.

The shares have defied gravity amid the turmoil surrounding President Donald Trump's tariffs -- outperforming every Magnificent Seven company since the start of the year. Much as the Mag 7 drove U.S. stocks up in 2024 and 2023, SAP is responsible for as much as half of the gains in Germany's blue chip DAX index, according to analysts at Deutsche Bank.

SAP -- which helps companies organize everything from billing to human resources to travel expenses -- still has a couple of things going for it. For one, the tariff turmoil seems to have only helped it in the first quarter. Unlike Apple or Tesla, it only makes software, so it shouldn't be directly affected by tariffs on goods. CEO Christian Klein said its products were important for helping to manage tariffs, so the general uncertainty wasn't hurting demand.

Second, it's only at the front end of moving products and clients to the cloud, as well as adding artificial intelligence capabilities to its software. That means there is still untapped potential for greater productivity and returns there.

With 86% of its sales coming from repeat customers, SAP has a knack for keeping its current clients. But also, Bernstein analysts led by Mark Moerdler noted that "two-thirds of the net new cloud customers were new to SAP, which shows the strength of their offerings."

At the same time, the sky probably isn't the limit, even for high-powered tech giants. SAP's peers such as Oracle, Microsoft, or Google-owner Alphabet haven't risen nearly as much recently, and SAP trades at a hefty premium. Its price-to-earnings ratio is at about 56, compared with 37 for Oracle, 35 for Microsoft, and 18 for Alphabet.

Nevertheless, most analysts still rate the shares a Buy, with an average price target of EUR300. The stock traded at about EUR265 on Friday. The event with Wall Street analysts will shed some more light on whether that valuation is justified.

Write to Brian Swint at brian.swint@barrons.com

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May 18, 2025 02:00 ET (06:00 GMT)

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