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22 Feb 2022
Ukraine War Risk. Global Software / EuroVision
SAP SE (SAP:ETR), 0 | Dassault Systemes SA (DSY:PAR), 0 | Microsoft Corporation (MSFT:NAS), 0 | Sage Group plc (SGE:LON), 1,142 | Oracle Corporation (ORCL:NYS), 0 | Intuit Inc. (INTU:NAS), 0 | Temenos AG (TEMN:SWX), 0 | ALPHABET INC-CL A (GOOGL:NYSE), 0 | Alphabet Inc. Class A (GOOGL:NAS), 0 | salesforce.com (CRM:NYSE), 0 | Salesforce, Inc. (CRM:NYS), 0 | Amadeus IT Group SA Class A (AMS:MCE), 0 | ServiceNow, Inc. (NOW:NYS), 0 | Workday, Inc. Class A (WDAY:NAS), 0 | TeamViewer SE (TMV:ETR), 0 | Snowflake, Inc. Class A (SNOW:NYS), 0 | Advanced Medical Solutions Group plc (AMS:LON), 184 | Dassault Systemes SA (0HB4:LON), 0 | Intuitive Investments Group Plc (IIG:LON), 128 | Microsoft Corporation (0QYP:LON), 40,200 | Oracle Corporation (0R1Z:LON), 11,550 | ServiceNow, Inc. (0L5N:LON), 0 | Workday, Inc. Class A (0M18:LON), 0
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Ukraine War Risk. Global Software / EuroVision
SAP SE (SAP:ETR), 0 | Dassault Systemes SA (DSY:PAR), 0 | Microsoft Corporation (MSFT:NAS), 0 | Sage Group plc (SGE:LON), 1,142 | Oracle Corporation (ORCL:NYS), 0 | Intuit Inc. (INTU:NAS), 0 | Temenos AG (TEMN:SWX), 0 | ALPHABET INC-CL A (GOOGL:NYSE), 0 | Alphabet Inc. Class A (GOOGL:NAS), 0 | salesforce.com (CRM:NYSE), 0 | Salesforce, Inc. (CRM:NYS), 0 | Amadeus IT Group SA Class A (AMS:MCE), 0 | ServiceNow, Inc. (NOW:NYS), 0 | Workday, Inc. Class A (WDAY:NAS), 0 | TeamViewer SE (TMV:ETR), 0 | Snowflake, Inc. Class A (SNOW:NYS), 0 | Advanced Medical Solutions Group plc (AMS:LON), 184 | Dassault Systemes SA (0HB4:LON), 0 | Intuitive Investments Group Plc (IIG:LON), 128 | Microsoft Corporation (0QYP:LON), 40,200 | Oracle Corporation (0R1Z:LON), 11,550 | ServiceNow, Inc. (0L5N:LON), 0 | Workday, Inc. Class A (0M18:LON), 0
- Published:
22 Feb 2022 -
Author:
Slowinski Stefan SS -
Pages:
5
Which Software stocks are most vulnerable to geopolitical risks in Ukraine?
Unfortunately, geopolitical risks in Russia / Ukraine remain high. The Russian stock market fell 14% on Monday as the market starts to price in more certainty of a military conflict. There is little direct exposure to Russian and Ukrainian economies across our Software coverage. SAP (likely an ERP provider to many of the Russian energy and industrial companies) may be the most directly exposed, but still only generates 1-2% of total revenues from Russia / Ukraine.
We identify those companies with the highest EMEA, and Software License, exposure
War in Ukraine may impact business confidence and spending across EMEA (not to mention weakening the Euro). In this note, we identify Software companies with the highest EMEA exposure, and the highest percentage of sales from Software Licenses (which are more likely to be impacted if geopolitical uncertainty increases into the end of Q1, just as we saw in Europe in Q1 2020 with COVID). Finally, we layer on a valuation overlay by looking at stocks with the highest P/Es, as high margin license weakness may more quickly result in missed earnings.
European Engineering Software, and legacy global license vendors, most at risk
As can be seen in the next page, European Engineering Software vendors (Aveva, Dassault Systemes, Hexagon and Nemetschek) still have 20-50% of sales from licenses (and hardware in Hexagon''s case) and have 30-60% exposure to EMEA. In that group, Dassault Systemes and Nemetsheck have the highest P/E multiples. Temenos and Microsoft (including Windows as licenses) also have high license exposure (~30%) and high EMEA exposure (near 40% of revenues at Microsoft). Legacy hybrids (Oracle and Suse) have 20% of sales from licenses + hardware exposure and 30-50% EMEA exposure. In Europe, Amadeus, Sage, SAP, TeanViewer all have sub-10% License exposure, despite high EMEA exposure. Amongst US Cloud Software vendors,...