Novo's Messages to SAP

Skew the timeline by about a year and the following chart emerges of the comparative performance of Novo (blue) and SAP (pink and developing).

Here are a few essential figures for these two mega caps (€277bn for SAP and €250bn for Novo). As a reminder Novo flirted with the €500bn market cap mark for a brief moment about 9 months ago.

These days, Novo’s superior top-line growth (c.+20%/year) is worth less at 15x 2025 earnings than SAP’s own slower growth (+13%) valued at 36x 2025 earnings. The comparative dividend yields confirm the gap (see table).

Wind back 9 months and Novo was trading at 36x its 2025 earnings. The gap between then and now is unrelenting competition wherein the cosy duopoly with Eli Lilly has attracted new entrants from every corner of the planet, a Trump threat of more chaos for Pharmas and a surrealist twist to Greenland geopolitics.

Investors in SAP may find it useful to pore over the highs and lows of Novo Nordisk. Both firms share their status as market darlings, the fact that they are largely dependent on their US clients (31% SAP, 61% Novo), are at the leading edge of their respective technologies, and are scarce enough in European investors eyes to reach eye-watering valuations. 

In 2024 SAP was the torch bearer for corporate Germany. Over the last few days it has become the torch bearer for European equities as LVMH and Novo have slipped down a few rungs.

There is however a big positive in SAP’s favour: earnings revisions. Over the last 12 months they have trended up from a consensus standpoint for 2025-2027. By contrast Novo’s earnings have been moderately trimmed since last October. The reality of more competition has finally sunk in.

Quite reasonably Novo’s message to SAP is really to be sure to maintain its oligopoly.