Workday Upgraded At Evercore ISI, Investors Need To Be Patient

In a report published Tuesday, Evercore ISI analyst Kirk Materne upgraded the rating on

from Hold to Buy, saying that the recent pullback in the company's shares provided "an interesting opportunity" for investors with a long-term view. Workday's shares had risen by 22 percent over the past 24 months, underperforming the SaaS peer group, which rose 49 percent. The company's shared declined 14 percent since the F1Q EPS call. Analyst Kirk Materne said that "investor expectations for Workday's Financials" were now "more realistic" and better reflected that "the adoption curve for Financials will be more linear as compared to HCM." Materne believes that Workday's core HCM offering could continue to boost overall revenue growth of 30 percent for the next few years, backed by "continued customer adoption and upselling Payroll, Recruiting and Insight Apps into the existing base, with Financials now representing more of a ‘call option'." The new price target of $95 implies that the "value of the Financials business compares favorably to other high-growth SaaS names," Materne added. In the report Evercore ISI noted, "We remain confident in the steady growth in WDAY's core HCM business (+37% y/y in FY16) and expect its suite of add-on solutions and Insight Apps will drive ASP growth."