Market Overview

Workday Is Growing Into Its Valuation


Workday Inc (NYSE: WDAY) has enough growth potential and valuation to see the stock crossing the $100 mark and even reach $120 in the next six-month period in a bullish scenario. Canaccord analysts Richard Davis and David Hynes Jr. increased their target price from $98 to $110.

The comments came after Workday hosted Rising 10 conference where about 8,000 people were present.. The brokerage listed four positives and opportunities from the event:

  • Functional set is either equal or superior than the rivals in all respects
  • Operating leverage to be more efficient with the help of COGS and S&M
  • Commercializing IaaS and PaaS platform
  • Widen customer base into Manufacturing in the wake of loss of momentum from legacy firms and subsidiaries

In the same way, Canaccord cited three following challenges:

  • Pushing developers to keep on adding features in mobile first concept
  • Hiring pace
  • Time-to-live cycles drive down

The brokerage pointed out that shares of Workday rallied following the mini-bubble in 2014 and it remained flat after June 2014. The firm believes it has become a commonality these days.

In a note, analysts said, "Inching PT to $110 on newly introduced C2018 estimates Our $110 PT is based on 9.0x EV/revenue and 60x EV/FCF on C2018E plus approximately $1.75B in prospective net cash and assumes ~225M shares outstanding."

The stock traded down by $1.20, or 1.31 percent, to $90.49.


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