By Scott Kanowsky
Investing.com -- SAP cuts its outlook after the divestment of its Qualtrics unit, while the balance of European business activity tips towards services and Tesla shares drop sharply.
1. SAP lowers guidance
Shares in SAP (ETR:SAPG) slipped in early trading on Friday after the business software group slashed its annual profit guidance, following the divestment of its subsidiary Qualtrics.
The tech giant sees non-IFRS operating profit at a range of €8.6 billion to €8.9 billion in 2023, a decrease of €200 million from its previous outlook. Revenue at its key cloud unit is also expected to come in at between €14B to €14.4B, slipping by €1.3B from its prior estimates.
The Walldorf, Germany-based firm noted that it has already stripped earnings from Qualtrics, the U.S.-listed corporate online survey maker it divested last month, out of its latest results. But SAP's returns have yet to include any income from the sale.
Meanwhile, first quarter revenues at the cloud division surged by 22% to €3.18B but still missed average Bloomberg consensus projections of €3.22B.
On a group-wide basis, three-month revenues were above expectations, thanks in large part to a boost from one-time license fees. Analysts at Jefferies argued that the beat was "not for the right reason," adding that investors will likely remain focused on the performance of the cloud business.
2. Services surge in Europe while manufacturing falters
Stock markets in Europe are under pressure to close out the trading week, with traders mulling over economic data out of the Eurozone.
A preliminary survey from S&P Global showed that business activity in the currency area touched an 11-month high in April, which the data provider is noting that this indicates that the economy has "gained further growth momentum" to begin the second quarter.
But S&P Global flagged that the upturn has become "increasingly unbalanced," with a surge in the services sector compensating for weak manufacturing output sparked by a slump in demand for goods.
Business confidence has remained resilient in the face of the recent banking industry crisis while easing supply constraints helped moderate inflationary pressures, S&P Global said.
However, Hamburg Commercial Bank chief economist Cyrus de la Rubia warned that price developments in the services sector will likely continue to worry European Central Bank officials.
"This increases the likelihood that the ECB will tighten monetary policy more, or for longer," de la Rubia said.