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The Bull And Bear Case For Workday Following An In-Line Q3

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The Bull And Bear Case For Workday Following An In-Line Q3

Karl Keirstead of Deutsche Bank said Workday Inc (NYSE: WDAY) posted roughly an in-line third-quarter results, with billings of $454 million, subscription revenues of $336 million and 1 percent non-GAAP operating margin (in line).

“The guide for billings growth of just 25–26 percent in 4QF17 and ‘lowteens’ in 1QF18 was disappointing, with WDAY calling out large deal delays in November given Brexit/Trump-related macro uncertainty as well as deal invoicing and seasonality,” Keirstead wrote in a note.

The analyst, who has a Hold rating on the stock, laid out the bull and bear case for the stock.

The Bull Case

For bulls, given the past conservative forecasts, the first quarter "low-teens" billings growth outlook could mean actual growth of 20 percent plus, hardly a catastrophe “if WDAY is indeed seeing deals skew from 1Q and if large deal invoicing terms are unusual.”

The Bear Case

But, the bears would not buy weak billings guide as merely conservative as deal delays could be stemming from stiff competition from Oracle Corporation (NYSE: ORCL) and SAP SE (ADR) (NYSE: SAP) and further push-out of long-awaited financials ramp. Keirstead said SAP may have grabbed the Microsoft Corporation (NASDAQ: MSFT) deal that was thought of going to Workday.

“A multiple of 7x–8x revs for a slowing 30 percent growth story in a highly competitive market is not cheap,” Keirstead highlighted.

For FY 2018, the analyst cut his revenue estimate to $2.0 billion from $2.1 billion, billings view to $2.4 billion from $2.6 billion and non-GAAP EPS forecast to $0.58 from $0.70.

Keirstead also trimmed his price target by $15 to $75, implying a FY 2018 revenue multiple of 8x.

At last check, shares of Workday fell 10.37 percent to $73.14.

Posted-In: Analyst Color Earnings News Guidance Price Target Reiteration Top Stories Analyst Ratings Best of Benzinga

 

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