Expect Another Beat From Workday, Barclays Says Ahead Of Q1 Earnings

Barclays expects an another beat from Workday Inc

and the focus remains on its financials offering as it is considered as the company's leg of growth. Workday, which provides enterprise cloud applications for finance and human resources industries, will report its first quarter results on May 31st after the market close. Street expects a loss of $0.02 a share and revenue of $338.68 million. Reiterating its Equal Weight rating, analyst Raimo Lenschow said: "We believe that the end market continues to be competitive." "We think the setup looks quite achievable based on historical q/q growth for Q1. Q1 billings have historically declined 5% from Q4, but current estimates imply a 28% decline," Lenschow wrote in a note. Billings are expected to grow 35 percent and face a pretty easy comparison as last year's first quarter billings grew only 31 percent. "Workday has historically beaten the high end of its own billings guidance by 10% on average, although this has been declining recently. Even just looking at the last four quarters, and taking the average 5.6% beat and applying it to the high end of guidance yields $385mn in billings, implying 42% y/y growth," the analyst said. Lenschow noted that the financials product remains in focus and believes that the combination of the sales force (that now sells both HCM and Financials) could provide a near-term bump to results since there are more feet on the street for each product. "We continue to expect some volatility around earnings, but believe that the stretched EV/FCF valuation for Workday, along with fears about increasing competition, will prevent significant upside to the stock past current levels," Lenschow added. The analyst raised price target to $71 from $60 on the stock, which fell 3.71 percent to $75.11.