What Is Workday Waiting For?
Discussing Workday Operational Health And How An Acquisition Makes Sense
Dallas Salazar • 13 Comments
Dallas Salazar • 13 Comments
Following Up On A Workday Short
Amit Ghate • 16 Comments
Amit Ghate • 16 Comments
Wed, Jun. 1, 2:58 PM
- After opening low following its post-earnings decline last night, business software firm Workday (NYSE:WDAY) has climbed with the market to log a 0.9% gain so far today.
- Analysts have largely reiterated their existing stances on the stock -- mainly Buys and Holds -- as the company beat expectations and guided strong but saw billings growth slowing.
- Citigroup's Walter Pritchard summed up a number of views: “Stock was controversial into the print, and we see Q1 results and outlook as good enough."
- Goldman Sachs (Neutral) took the opportunity to raise its price target, to $80 from $71 (implying about 5% upside ahead). Meanwhile, Piper Jaffray (Hold) saw the report and lowered its target, to $74. Shares are at $76.46, in the red for 2016 but up 56% since early February.
- “We could see some (stock) pressure as the billings outperformance this quarter was more muted, though the raised billings view and pipeline commentary should limit any downside,” wrote Justin Furby of William Blair.
Tue, May 31, 4:28 PM
- With shares up sharply from their February lows going into earnings, investors are in profit-taking mode (for now, at least) after Workday (NYSE:WDAY) beat FQ1 estimates and offered slightly above-consensus FQ2 sales guidance. The stock is currently down 3.9% after hours to $72.85.
- FQ1 top-line metrics are solid: Cloud app subscription revenue rose 39% Y/Y to $280M, and professional services revenue grew 31% to $65.4M. The unearned revenue balance rose 42% to $926.1M, a growth rate on par with FQ4's in spite of a slowdown in revenue growth to 38% from 43%.
- GAAP costs/expenses rose 38% Y/Y to $419.1M, with sales/marketing accounting for $127.5M and R&D $141.8M. Op. cash flow and free cash flow for the last 12 months are respectively $327.9M and $188.1M. Workday ended FQ1 with $2.1B in cash/investments and $514M in convertible debt.
- Wedbush downgraded ahead of earnings last Friday, citing soft reseller checks and Workday's performance since February.
- Workday's results/guidance, earnings release
Tue, May 31, 4:04 PM
Mon, May 30, 5:35 PM
Fri, May 27, 12:36 PM
- Wedbush's Steve Koenig has downgraded Workday (WDAY -3.4%) to Underperform ahead of Tuesday's FQ1 report, while keeping a $63 target. He states reseller checks "point to softer implementation pipelines due to pressure from macro-related and competitive factors, compounding our concerns about ORCL’s aggressive discounting and valuation.”
- Koenig, who downgraded the cloud HR/financials software leader to Neutral in November on concerns about aggressive price pressure from Oracle, adds he's "hearing of general buyer hesitance to sign large deals, which integrators attribute to several possible causes." The weakness is centered around Workday's core cloud HR/HCM business, with financials strength partly offsetting.
- He notes Workday is up 60% from its Feb. 8 bottom compared with a 13% gain for the S&P 500, and that shares now sport a 6.6x forward EV/sales multiple (above a 5.3x average for high-growth SaaS names). "Relatively high short interest (15% of free float) could limit near-term downside, but we see risk/reward as skewed negatively over the next 12 months."
Mon, May 9, 11:01 AM
- Believing new revenue-recognition rules will prevent many firms from implementing Workday's (WDAY -1.4%) cloud financials apps, Brean's Yun Kim has downgraded shares to Sell, and set a $55 target.
- Kim thinks companies will be nervous about "additional risk and uncertainties" as they adopt the new rules. Though Workday still gets the lion's share of its revenue from its cloud HR apps, the company has been counting on financials apps to act as a growth driver. Workday disclosed on its FQ4 earnings call over 100 financials clients were now live.
- Pac Crest downgraded Workday last month. FQ1 results arrive on May 31.
Mon, Apr. 25, 11:02 AM
- Workday (NYSE:WDAY) is off 1.3% as Pacific Crest has cut to Sector Weight, suggesting it's profit-taking time.
- By Friday, shares had risen 63% from a 52-week low of $47.32 hit on Feb. 9 to hit an intraday high of $77.49. Pacific Crest had previously set a $76 target.
- The stock's back to being "one of the most expensive names in SaaS," says the firm's Brendan Barnicle. Not only is the valuation hot, but "Workday’s competitive position could be more uncertain over the remainder of the year, and billings could still face a headwind from changes in billing terms."
- Oracle and SAP are more aggressive competitors now, he says. "Generally, we believe that Oracle and SAP are winning more in the mid-market than in Workday’s high-end market, but those competitive wins can stall deals as customers are forced to investigate the Oracle and SAP solutions more fully."
- Now read Workday Is About Solving People's Problems, Oracle Is About Systems »
Thu, Apr. 21, 1:09 PM
- Three months ago, cloud/SaaS software firms sold off after cloud IT service management software (ITSM) firm ServiceNow (NOW +14.5%) missed its Q4 billings guidance and offered light 2016 sales guidance. Today, the group is rallying after ServiceNow beat Q1 estimates, provided in-line guidance, and reported billings of $376.7M, up 41% Y/Y and beating guidance of $360M-$365M. The company also reported a 48% Y/Y increase in clients with over $1M in annualized contract value, to 249.
- Cloud gainers include HR/financials software leader Workday (WDAY +2.3%), ERP/commerce software firm NetSuite (N +4.9%), marketing automation software firms Marketo (MKTO +3.1%) and HubSpot (HUBS +3.2%), talent management software firm Cornerstone OnDemand (CSOD +2.9%), customer support software firm Zendesk (ZEN +3.8%), collaboration/project management software firm Atlassian (TEAM +2.6%), enterprise healthcare software firm Castlight (CSLT +5.4%), and life sciences software firm Veeva (VEEV +2.4%). The Nasdaq is nearly flat.
- BTIG's Joel Fishbein has hiked his ServiceNow target by $5 to $85, while reiterating a Buy rating. "Strong results across the board suggest that the company continues to see success both in core ITSM and as a broader enterprise service tool. After enjoying most of its public life as a beat-and-raise stock, 2015 was somewhat messy; strong growth and good [key performance indicators] supportive of the bull thesis were overshadowed throughout the year by minor miscues -- a forecasting error, currency adjustments, and inconsistent billings reporting.
However, 1Q was clean, with strong billings growth, healthy upsells, and metrics showing growing contribution from non-IT services. Law of large numbers is still looming on the horizon but ServiceNow is on the path of being one of a few elite category-leading enterprise SaaS companies. We continue to be buyers of NOW."
Tue, Apr. 12, 10:01 AM
- Robynne Sisco, formerly Workday's (WDAY -0.9%) chief accounting officer and before that VMware's accounting chief, has been named Workday's CFO.
- Sisco is replacing co-President Mark Peek as CFO, but will continue reporting to him. Peek and Phil Wilmington were named co-Presidents in June 2015, with Peek put in charge of finance (now Sisco's responsibility) and "most aspects of the company's business operations." Wilmington is in charge of sales and customer services.
Tue, Mar. 1, 1:25 PM
- Down slightly for a while yesterday after issuing light FQ1 sales guidance and roughly in-line FY17 sales guidance to go with an FQ4 beat, Workday (WDAY +9.6%) is now flying higher. JPMorgan and Cross Research have upgraded to bullish ratings.
- Workday's 43% Y/Y FQ4 billings growth has been well-received, and so has its guidance for ~30% FY17 billings growth and accelerating net new annual contract value (ACV) growth. Billings growth contributed to a 42% Y/Y increase in Workday's unearned revenue balance to $900M.
- FBR's Samad Samana (Outperform, $80 target): "A record level of new customer additions (>120 overall; >40 for financials) and high attach rates for add-on products drove billings upside. The strong demand environment for both HCM and financials [software] in F4Q, a robust pipeline, investments for growth, and a host of new products to be released this year also supported the above-consensus FY17 billings guidance and belief that new ACV will accelerate in FY17.
Samana also notes Workday's sales guidance would've been better if not for the de-emphasizing of professional services. He considers Workday's margin outlook (profitability is expected in FY18) disappointing, but nonetheless thinks "investors will appreciate WDAY can deliver mid-30s organic growth, even as it has surpassed the $1B subscription revenue run-rate, and will patiently wait for margin expansion down the road."
- Needham's Scott Berg (Buy, $80 target): "Our checks have been ahead of the increased traction in Financials and with sales pipeline activity up 150% Y/Y entering FY17, we believe the strong 4Q Financials sales traction likely sets up for a materially better year for Financials sales. We also like WDAY’s move to shift more services to partners as it incentivizes more channel sales and makes the WDAY model more profitable."
- Brean's Yun Kim (Hold) is more cautious. "While the subscription backlog grew 62%, we remain uncertain how much of that was driven by new business bookings vs. increase in contract length (2 months) and favorable contract terms ... Overall, given lack of transparency into its new business bookings, we believe there will likely be a high degree of uncertainty that exists among investors regarding its true sales momentum."
- On the earnings call (transcript), CEO Aneel Bhusri stated Workday ended FQ4 with 1,181 customers, with Financials clients growing by over 40 to 207 and Recruiting clients rising to 545. He added 30% of new customers are subscribing to Workday's full platform, and claimed FQ4 win rates were "the higher we have seen over the past eight quarters," with "historically strong" win rates posted against SAP and Oracle.
- Though GAAP net loss totaled $289.9M in FY16 and non-GAAP net loss $2.5M, Workday produced $125M in free cash flow thanks to billings/deferred revenue growth. The company ended FY16 with $1.97B in cash and $507M in convertible debt.
- Workday's results/guidance, earnings release
Mon, Feb. 29, 4:07 PM
- Workday (NYSE:WDAY): FQ4 EPS of -$0.01 beats by $0.04.
- Revenue of $323.4M (+42.9% Y/Y) beats by $3.77M.
- Expects FQ1 revenue of $337M-$339M, below a $343.1M consensus. Expects FY17 (ends Jan. '17) revenue of $1.54B-$1.55B vs. a $1.55B consensus.
- Raises FQ1 billings guidance to $360M-$365M from $350M. Expects FY17 billings of $1.855B-$1.875B.
- Shares -1.6% after hours.
- Press Release
Sun, Feb. 28, 5:35 PM
Wed, Feb. 24, 5:32 PM
- Cloud HR software leader Workday (NYSE:WDAY) is up 5.5% after hours to $60.72 after cloud CRM software leader Salesforce (up 9.2%) slightly beat FQ4 sales estimates, posted in-line EPS, issued above-consensus FQ1 guidance, and slightly upped its FY16 guidance. Salesforce also reported a small Y/Y acceleration in deferred revenue growth.
- Workday's own FQ4 report is due on Feb. 29. OTR Global reported positive pre-earnings checks last week.
Fri, Feb. 19, 2:56 PM
- OTR Global has upgraded Workday (WDAY +5.7%) to Positive from Mixed ahead of the cloud HR/financials software vendor's Feb. 29 FQ4 report. Checks lead the firm to believe Workday will top FQ4 estimates. (source: Notable Calls)
- Also: Barclays has hiked its Workday target by $10 to $60, while reiterating an Equal Weight rating.
- Piper offered more cautious commentary on Tuesday, stating checks point to strong price pressure from Oracle - Wedbush and Jefferies have reported something similar - and that "recent quarterly trends suggest less potential upside in billings." Mitsubishi launched coverage with an Overweight rating last week, while talking up Workday's long-term opportunity.
Tue, Feb. 9, 10:48 AM
- Declaring the company to be in the early stages of a "long-tailed enterprise HR implementation cycle," Mitsubishi UFJ's Stephen Bersey has launched coverage on Workday (WDAY +2.5%) with an Overweight rating and $60 target.
- Bersey: "[H]uman resources (HR) has been an area of IT neglect within the enterprise application market, and that has created a large market opportunity for cloud-based vendors." He's also upbeat on the long-term potential of Workday's cloud financials offerings, while cautioning HR products will remain the main near-term growth driver. "[T]he value of the financials end-market could be greater than that of the HR market and that this opportunity is not fully reflected in the stock’s value.”
- Workday is bouncing a little after having dropped 24% over the prior two trading days thanks to a tech rout in which cloud software firms were among the hardest-hit names. FQ4 results arrive on the afternoon of Feb. 29.
- Three months ago: Wedbush downgrades Workday post-earnings on Oracle fears; others defend
- Four months ago: Stephens upgrades Workday, expects more financials traction
Mon, Feb. 8, 2:37 PM
- Many tech stocks are seeing 6%+ losses as investors flee to safety yet again. The Nasdaq is down 3.4%, and the S&P 2.7%.
- As was the case on Friday following Tableau and LinkedIn's disappointing guidance, a slew of enterprise tech stocks are seeing big losses, with cloud software and security tech names well-represented on the casualty list.
- Also: Solar stocks are having another brutal day (TAN -6.7%) as energy stocks get routed amid fears Chesapeake Energy is close to bankruptcy. WTI crude oil is once more near $30/barrel.
- Enterprise software decliners: Adobe (ADBE -9.6%), Paylocity (PCTY -19.1%), Salesforce (CRM -9.9%), Workday (WDAY -12%), Guidewire (GWRE -12.5%), ServiceNow (NOW -11.5%), Zendesk (ZEN -13.8%), Paycom (PAYC -13.4%), Marin Software (MRIN -10.3%), Castlight (CSLT -8.4%), Cornerstone OnDemand (CSOD -12.1%), Atlassian (TEAM -13.2%), inContact (SAAS -9.6%), and Bazaarvoice (BV -14.5%).
- Enterprise security decliners: Palo Alto Networks (PANW -12.2%), FireEye (FEYE -9.8%), CyberArk (CYBR -11.5%), Proofpoint (PFPT -12.7%), Qualys (QLYS -8.9%), Imperva (IMPV -9.7%), Rapid7 (RPD -9.4%), and Barracuda (CUDA -8.4%).
- Solar decliners: SunEdison (SUNE -11.3%), SunPower (SPWR -8.8%), JinkoSolar (JKS -7.6%), SolarEdge (SEDG -7.9%), Yingli (YGE -7.1%), TerraForm Power (TERP -10.7%), and TerraForm Global (GLBL -9.2%).
- Other major decliners: Micron (MU -9.1%), Western Digital (WDC -10.5%), Arista (ANET -10.9%), Universal Display (OLED -10.6%), Rackspace (RAX -11.3%), Fitbit (FIT -8.7%), Nimble Storage (NMBL -11.3%), Sierra Wireless (SWIR -9.9%), Rocket Fuel (FUEL -9.8%), Knowles (KN -9%), Mitel (MITL -8.9%), and Alarm.com (ALRM -8.9%).
- Previously covered: Yelp, Cognizant, Tableau, Globant, Ambarella, European tech stocks
Workday, Inc. provides enterprise cloud applications for human capital management, payroll, financial management and analytics. It offers innovative and adaptable technology focused on the consumer Internet experience and cloud delivery model. The company applications are designed for global... More
Industry: Application Software
Country: United States
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