Workday Still Poised To Be A Leader In ERP Market

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Workday Inc WDAY reported its Q3 results marginally ahead of expectations. The challenges seem to be in the near term, while the company appears poised to be a leader in the ERP (enterprise resource planning) market in the long term.

BTIG’s Joel Fishbein maintained a Buy rating, while reducing the price target from $97 to $88.

Workday’s shares declined ~12 percent after management’s commentary on macro uncertainty and slipped deals.

“We find it slightly odd that the company is already calling out deal slippage one month into the current quarter, and worries have been cropping up about an intensifying competitive environment,” Fishbein commented.

Moreover, there seems to be more seasonality in the business than was earlier anticipated. These factors have added some extent of unpredictability, although management projected at least 30 percent year-over-year growth in the core HCM market and a “potential inflection around Financials.”

Challenges Seem Near Term

“We still think that long-term Workday is poised to be a leader in the ERP market, but adjust our estimates and price target to account for near-term uncertainty,” Fishbein wrote.

The win rates against legacy competitors have remained steady, and Workday had already been selected for the large multinational deals that slipped.

“This mitigates our fears around creeping competitive threats from Oracle ORCL [Rated: Buy, PT: $47] in the enterprise and Netsuite in the lower mid-market,” the analyst mentioned.

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Posted In: Analyst ColorLong IdeasPrice TargetReiterationAnalyst RatingsTrading IdeasbtigJoel Fishbein
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