Workday Shares Maintain Gains On Tuesday's Release

Workday WDAY shares are seeing strong volume in Wednesday’s pre-market after posting strong earnings and guidance.

Revenue for the company’s first quarter was $159.7 million versus the $152.42 million estimate. Year over year sales growth is an outstanding 74.3 percent. 80 percent year over year subscription growth led the way. CEO Aneel Bhusri commented, “Our fiscal year is off to a great start with strong customer demand for our newest application, Workday Recruiting, and double
digit customer growth for Workday Financial Management.”

Earnings were 13 percent better than expected and 13 percent better than the same period last year at a $0.13 loss. Earnings highlights include the cost of subscription services as a percent of sales dropping from 21.8 percent to 17.4 percent, product development expense rising by 79.6 percent, and sales expenses rising by 77.7 percent. The latter two outpaced sales growth.

Related: Morgan Stanley Sees Strong Start To FY15 With Q1 Beat For Workday

Despite the strong quarterly results, investors were most excited about the forward guidance. Revenue for the second quarter is expected to range from $173 million to $178 million while the analyst consensus is just $171.5 million. Full year revenue is predicted to range from $730 million to $750 million, two percent higher than the previous projection.

Regarding current valuation of the stock, Barclays analyst Raimo Lenschow commented, “Valuation of ~14x CY15E EV/Sales is still high on both an absolute and relative basis, despite the correction of the past few months. However, given the large potential TAM and structural opportunity the stock is likely to maintain a meaningful premium even vs. other high-growth companies.” Lenschow currently has an $83 price target on Workday.

Shares of Workday are up 5.69 percent from the report and 14.45 percent over the last five trading sessions.