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Wim Dankbaar
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See my entry on Linkedin http://www.linkedin.com/profile/edit?trk=tab_pro Owner jfkmurdersolved.com Broadcast Media industry 2003 – 2011 (8 years) Overveen owner/director Stickerstation Benelux Entertainment industry 2000 – 2003 (3 years) Amstelveen... More
  • A Wake-Up Call To Workday's Valuation 6 comments
    Feb 12, 2013 11:04 AM

    A Wake-Up Call To Workday's Valuation.

    Workday is arguably and provably the most overvalued technology stock with lots of downside risk in the near future.

    Let me make my point:

    Just go to the stock screener of Google Finance.

    http://www.google.com/finance#stockscreener

    Choose as sector "Technology"

    Get rid of all the criteria (by clicking on the X behind PE ratio etcetera). But leave the market cap and select a market of 2 billion or higher. Then add Price to Sales ratio (via add criteria) and fill out a PS ratio of 30 or higher.

    Can you let me know how many results you get?

    Then I don't even mention that almost half of Workday's revenue is loss.

    Another detail to take into account is that Duffield's last company Peoplesoft was bought in 2004 by Oracle (via a hostile takeover) for 10.3 billion. Peoplesoft had revenue of 2.6 Billion dollar and annual profit of more than 60 million dollars. So it was bought at roughly 4 times revenues. Larry Ellison started his bid at 5 billion something and kept ramping it up to 10.3 billion until the shareholders could no longer refuse.

    Workday however is hugely unprofitable and has about 10% of Peoplesoft's 2004 revenues. Yet it has already a market cap comparable to the 2004 purchase sum of Peoplesoft. If that's not a bubble I don't know what is!

    In fact, you could argue that WDAY is overvalued with a market cap of 2-3 billion USD. I mean an unprofitable company at 8 to 10 times sales is richly valued. Is it not?

    Did I mention that the lockup expiry is April 13, 2013? Does anyone truly believe that insiders will not cash in at the current valuation above the already inflated and raised IPO price of 28 dollars?

    Keep in mind that a few months before the IPO the analysts were marveling that Workday would go public at a valuation of 2 billion dollars.

    It is now - not even a year later - north of 8 billion dollars. While it yet has to prove itself to be able to make a profit. According to management, of which the CEO is 72 years old, profitability is at least two years away. And net loss of 41 million dollars last quarter, is forecasted to increase over Q1 of 2013.

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Comments (6)
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  • Valueplay98
    , contributor
    Comments (584) | Send Message
     
    I can't wait for April options to open up next week ... I have some Jun puts already, but would looking forward to adding more for Apr.
    12 Feb 2013, 01:27 PM Reply Like
  • jcracked
    , contributor
    Comment (1) | Send Message
     
    Despite your persistent negativity on $WDAY, the trading range since IPO has only been between about $5 at very low volume. Seems like shorting this stock would be a dangerous proposition.
    19 Feb 2013, 05:26 PM Reply Like
  • slotbox
    , contributor
    Comment (1) | Send Message
     
    You were wrong about $NOW after most recent lockup expry in Feb. Why would you be right about $WDAY in April?
    20 Feb 2013, 02:22 AM Reply Like
  • Wim Dankbaar
    , contributor
    Comments (441) | Send Message
     
    Author’s reply » Now has 55% of the float short. More than any other stock It is only logical a short squeeze would come. It could go higher on this squeeze. It's not a rise on strength. Actually more than half of the float believe it's a sell,

     

    On the previous lockup it fell from 40 to 25. Once the shorts are shaken out it will probably dive under 25 again.
    20 Feb 2013, 08:18 AM Reply Like
  • Meister44
    , contributor
    Comments (9) | Send Message
     
    NOW is down to 19% of float short, not 55%. Ever since UBS switched their Sell rating to a Buy and increased the price target, smart shorts have bailed. It dropped from $40 last year when UBS put a sell rating on it.

     

    Be careful on shorting WDAY. The day when lockups expire, stock price usually goes up.
    20 Feb 2013, 06:44 PM Reply Like
  • Wim Dankbaar
    , contributor
    Comments (441) | Send Message
     
    Author’s reply » I am not saying that I will be right about WDAY on lockup. I am saying that the odds are better for a decline. This is just using pure logic. I mean, if you own something that it is worth one dollar, would you sell it for four dollars?
    20 Feb 2013, 08:59 AM Reply Like
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