Analysts attended Workday, Inc's WDAY Rising Conference and Analyst Day and had mixed reactions.
Needham analyst Scott Berg reiterated a Buy and $220 price target, citing strong attendance with impressive demand trends thanks to customer/partner energy.
While a significant new product announcement was missing, the company announced several enhancements to essential products he felt should enable it to maintain its strong differentiation.
The company reiterated its 20% subscription growth goal during the path to $10 billion in organic revenues, but more persistent HCM growth could drive modest upside to this 20% growth goal, macro notwithstanding.
Management also announced its expectation for margin leverage to return in FY24 after compressing in FY23. Increased focus on vertical specialization was a key theme that we believe can drive further Fins adoption.
Morgan Stanley analyst Keith Weiss has an Overweight rating and a $282 price target. He said Workday management "could have done more to de-risk the outlook" at the company's analyst day meeting.
Weiss noted that CEO Aneel Bhusri informing an analyst that 20%-plus growth is a "plan" and not a "commitment" does not "exude confidence in that 20%" even if his comments that a volatile macro backdrop is not in their control were "very much true."
However, management explained well why the longer-term durable free cash flow growth potential at Workday outweighs the near-term macro risk, said Weiss. He thinks this durability is not priced at current levels.
The company is sustaining 20%-plus top-line growth with best-in-class unit economics that give it a clear line of sight for operating margins to improve from 19% today to 25%, likely over the next three years, added Weiss.
Canaccord analyst David Hynes reiterated his Buy rating and $200 price target.
Hynes came away with a reinforced conviction that most HCM and Financial systems of record are ultimately moving to the cloud. Workday is the clear category leader among mid-market and large buyers regarding vision, reputation, and ability to execute.
Price Action: WDAY shares traded higher by 0.11% at $160.28 on the last check Wednesday.
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