Workday Beats Expectations: Wall Street Opinions Are Mixed

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Workday Inc WDAY on Wednesday reported fourth-quarter earnings that met analyst expectations. The company reported EPS of -$0.06, in line with consensus estimates, and revenue of $226 million, which beat expectations of $223 million and is up 59 percent from last year.

Shares of Workday trade recently at $87.23, down 7.1 percent.

Here is what Wall Street firms are saying about the earnings report.

Cantor Fitzgerald

"Our enthusiasm around the Workday story remains intact given another strong quarterly performance and our continued optimism around the company's long-term growth prospects. As such, we continue to believe Workday represents one of the best next-generation cloud plays."

Cantor Fitzgerald rates Workday as a Buy with a $121 price target.

Wedbush

"The company has gained rapid momentum in the global HR market... Although WDAY is currently unprofitable, we expect operating margin improvement to be driven by scale economies in R&D and G&A, but most importantly by an improving sales and marketing cost profile."

Wedbush highlighted that cash flow from operations increased to $13 million in the fourth quarter, while gross margin increased to 71.2 percent due to higher-than expected subscription revenue offsetting lower service utilization rates.

Wedbush rates Workday as Outperform with a $108 price target.

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Summit

"Deferred revenue growth improved in the quarter, picking up from F3Q's slower revenue gains….Operating margins were below our expectations at -5.9% versus our -2.5 percent...We think the stock is fully valued and prefer to wait for a better entry point."

Summit said risks to the company's valuation include the feasibility of cloud security and network up-time.

Summit rates Workday as Hold with a $92 price target.

Morgan Stanley

"We believe WDAY is re-defining the established, $39B ERM market with a disruptive SaaS platform positioned to take meaningful share from legacy vendors at the same time as we are entering a multi-year refresh cycle of technology that is often >10 years old. The next few years are investment years for WDAY, but this spend should significantly expand distribution, deliver a broader set of products and create a significant technology moat."

Morgan Stanley believes that risks to the company include increased competition from legacy vendors and slowing profitability due to higher investments and faster growth.

Morgan Stanley rates Workday as Equal-Weight with a $102 price target.

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Posted In: Analyst ColorPrice TargetAnalyst RatingsTrading IdeasCantor FitzgeraldMorgan StanleySummittWedbush
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