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

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

Barclays expects an another beat from Workday Inc (NYSE: WDAY) and the focus remains on the company's "pillar of growth" — financials offering.

Workday, which provides enterprise cloud applications for finance and human resources industries, will report its first quarter results on May 31 after the market close. The Street expects a loss of $0.02 a share and revenue of $338.68 million.

Rating And Justification

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 percent from Q4, but current estimates imply a 28 percent decline," Lenschow wrote in a note.

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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 percent on average, although this has been declining recently. Even just looking at the last four quarters, and taking the average 5.6 percent beat and applying it to the high end of guidance yields $385 million in billings, implying 42 percent 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.

Expectations And Figures

"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 was down 3.71 percent to $75.11 at time of writing.

Posted-In: Analyst Color Earnings Long Ideas Price Target Previews Reiteration Analyst Ratings Tech


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