- After tumbling on Wednesday in the wake of its FQ1 beat and in-line guidance, Workday (NYSE:WDAY) has continued trending lower. Shares fell 1.5% in regular trading today, hitting their lowest levels since Feb. 2.
- Though no downgrades have arrived, several sell-side firms have suggested tougher competition is hurting growth, with Oracle's (NYSE:ORCL) cloud HR/HCM software the biggest culprit. Jefferies' John DiFucci: "We believe Oracle (and to a lesser degree, SAP) has been behaving irrationally in the market for almost a year ... while it was likely aggressive prior to this, we believe it became even more aggressive doing almost anything to win deals from Workday."
- DiFucci sees a method to Oracle's madness. "This irrational behavior may not be so irrational since a loss to Workday is not only a loss of an HCM opportunity, but also a loss of Oracle infrastructure given Workday’s proprietary infrastructure architecture." However, he admits Oracle/SAP's HCM offerings (though improving) "still trail Workday by a meaningful margin."
- Likewise, Brean's Sarah Hindlian asserts HCM is "becoming incrementally more competitive, with material new pricing pressure from incumbents, while SaaS penetration of the market is maturing." She also thinks Workday's cloud financials software growth is slower than investors were expecting.
- Cowen's Jesse Hulsing is more positive, even if FQ1 billings were lighter than he forecast. "We are ... encouraged by the trend toward larger, blue chip HCM custs (Coca Cola, etc.) and a more bullish tone regarding the financials pipeline. PT to $101 and view the low $80s as attractive entry point, as we expect growth to improve moving forward."
- During Oracle's March FQ3 CC (transcript), Mark Hurd didn't pass up the chance to trash-talk Workday. "In the context of HCM, I think ... we have simply engineered now a better product than Workday ... we now win more than half the deals in the United States. Outside the United States, our win rate goes up actually exponentially because of the breadth of our distribution in those markets." Workday might beg to differ with those claims.