Workday Inc WDAY reported fourth-quarter earnings Thursday that surpassed analyst estimates.
Fourth-quarter adjusted EPS came in at 73 cents, topping the Street estimate of 55 cents, and revenue of $1.13 billion beat the Street estimate of $1.12 billion.
The tech company, which provides business software products and solutions, saw lower subscription numbers in the quarter as it worked through a backlog, but said that growth was aided by new business.
“Personally, one of the Q4 highlights was around our pipeline efforts,” said Workday co-CEO Chano Fernandez. “As we have described over the last two earnings calls, our pipeline generation has been improving since the onset of the pandemic.”
The Workday Analysts: Credit Suisse analyst Brad Zelnick maintained a Neutral rating on Workday and decreased the price target from $245 to $235.
Morgan Stanley analyst Keith Weiss maintained an Overweight rating and $305 price target.
Needham analyst Scott Berg maintained a Buy rating and increased the price target from $260 to $290.
Piper Sandler analyst Brent Bracelin maintained a Buy rating and $285 price target.
Credit Suisse On Workday: Workday's commentary around the pipeline and recent acquisition of Peakon look promising for revenue acceleration, but the subscription revenue for the fourth quarter was disappointing, Zelnick said.
“If revenue acceleration for WDAY arrives, it’s more likely a late FY22 or FY23 event in our view,” the analyst said.
Morgan Stanley On Workday: While Workday reported subscription revenue below estimates, the company has strong bookings growth prospects for fiscal 2022, Weiss said.
"While this strength might take a couple of quarters to fully translate into reported numbers, we see a solid opportunity for patient investors to get on board a very well secularly positioned, core SaaS holding at a reasonable valuation," the analyst said.
Needham On Workday: The pandemic hindered bookings for the quarter, but international growth should help bring higher revenue in 2022, Berg said in a note.
“Sales pipeline build activity was more bullish than expected and, when coupled with reasonably conservative cRPO guidance, suggests cRPO growth can re-accelerate as early as 1Q and revenue growth rates to follow in 2H22,” the analyst said.
Piper Sandler On Workday: “Solid Q4 results and bullish commentary on a robust pipeline build ahead of the new fiscal year could be overshadowed by conservative guidance,” Bracelin said in a note.
Workday could be a laggard play and has the potential to become a leader as a cloud software pure play in 2022, the analyst said.
Piper sees Workday as a top pick in 2022 and recommends buying any weakness in the stock, he said.
WDAY Price Action: Workday shares lost 2.39% in Friday's session, closing at $245.18.
Photo courtesy of Workday.
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