Roula Khalaf, the Editor of the Financial Times (FT), curates her preferred stories in a weekly newsletter known as the Editor’s Digest, available for free.
In recent developments, the software company SAP has surpassed Danish pharmaceutical manufacturer Novo Nordisk to become Europe’s most valuable company, marking a significant achievement for Germany’s flourishing stock market. On Monday, SAP’s shares increased by 1.5%, taking its market value past €314 billion, slightly exceeding Novo Nordisk, whose shares declined by 1.7%.
Over the past year, SAP’s stock has appreciated more than 40% as investors have welcomed the transition of its business clientele to cloud services and the company has capitalized on the growing interest in artificial intelligence. These gains have contributed to a rally in Frankfurt’s blue-chip Dax index, positioning it ahead of most major global stock markets.
Novo Nordisk, on the other hand, has lost half its market value since last summer, struggling to assure investors of a significant follow-up to its popular GLP-1 anti-obesity medications. Emmanuel Cau, an analyst at Barclays, remarked on the declining excitement surrounding Novo Nordisk compared to SAP’s current benefit from increased investments in German equities.
Last year, SAP replaced Dutch semiconductor equipment producer ASML as Europe’s largest technology entity.
Located in Walldorf, southwestern Germany, SAP now constitutes a larger portion of the German stock index than the historic car industry, which includes companies like Volkswagen and Mercedes-Benz. The company’s significance in the Dax has often exceeded a 15% limit, leading Deutsche Börse to launch a new uncapped index version last month.
Founded by five ex-IBM employees in 1972, SAP has recently shifted its business model from selling on-premise software licenses to offering cloud service contracts, which provide a more predictable and profitable revenue stream.
Market analysts project SAP’s cloud revenue will increase by 29% this year, with total revenue expected to grow by 13% to €38.5 billion. They have also noted a promising new product unveiled by SAP last month, which enables customers to link their data with third-party data and perform analysis using AI-driven tools.
Although SAP’s shares have decreased by around 10% from last month’s record high, its competitors for Europe’s most valuable company position have experienced steeper declines.
Novo Nordisk has recently been in competition with French luxury group LVMH for the top spot in Europe over the past two years. However, this month, Novo Nordisk reported a second set of unsatisfactory trial results for CagriSema, a potential successor to the breakthrough treatments Ozempic and Wegovy. This uncertain product lineup has complicated a narrative of success, as sales of its existing obesity drugs surged over 50% last year.