Wells Fargo Raises Workday Price Target On Expectations Of Continued Market Share Gains

Workday Inc WDAY reported solid fourth-quarter results Thursday and raised FY20 guidance. The company’s market share gains, product improvements and growth in sales volume are impressive, according to Wells Fargo.

The Analyst

Wells Fargo’s Philip Winslow maintained a Market Perform rating on Workday and lifted the price target from $165 to $185.

The Thesis

The enterprise-level software solutions provider reported fourth-quarter revenue and EPS of $788.6 million and 41 cents, respectively, beating the consensus expectations of $776.9 million and 32 cents.

Subscription revenue grew 37.5 percent versus the consensus estimate of 35.6 percent.

Workday’s quarterly results were driven by continued market share gains in the core human capital management business; a record number of financial management deals signed; and an all-time high number of new customers, Winslow said in a Friday note. 

The company highlighted that the results were backed by a growing acceptance of cloud-based financials and a record quarter for Workday Prism Analytics.

Workday guided to first-quarter subscription revenue, total revenue and operating margin of $692-$694 million, $812-$814 million and 13 percent, respectively. The company raised its FY20 subscription revenue and operating margin guidance from $3-$3.010 billion to $3.030-3.045 billion and from 12 percent to 12.3 percent.

Winslow said he expects Workday to continue to gain share in the HCM, payroll, financials and enterprise performance management markets. The analyst raised the revenue and EPS estimates for FY20 from $3.501 billion to $3.542 billion and from $1.50 to $1.65, respectively.

Price Action

Workday shares were down 4.5 percent at $189.02 at the time of publication Friday. 

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Photo courtesy of Workday.