Brean Capital Reiterates Sell on Workday (WDAY) Following Analyst Day and User Conference
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Brean Capital reiterated a Sell rating and $62.00 price target on Workday (NYSE: WDAY) following the company's Financial Analyst Day and User Conference. While the event was informative, Brean Capital believes that no new significant information was presented. The keynote was focused on highlighting its single unified platform consisting of one data model, one security model, one development environment and one single code base.
Analyst Yun Kim commented, "We attended WDAY’s annual user conference (Workday Rising) and the Financial Analyst Day held in Chicago. Attendance was a record 7,000+, with 4,200+ existing customers and 520+ prospective customers. Focus of the keynote was on the benefits of unified platform, analytics (via Platfora acquisition), Financials application, Learning application, Student application and free data-as-a-service offering. WDAY also announced a partnership with MSFT (Not Rated) around Office 365 integration and also general availability of its much anticipated Planning application. Overall, while the event was informative, no new significant information was presented, in our view. There wasn't much discussion regarding the need to better penetrate Fortune 500 accounts with its Financials app. Instead, the company highlighted expansion opportunity beyond its core products (Human Capital Management and Financials) through strong attach rates of its additional modules such as payroll, recruiting, projects and time tracking. It sees this attach opportunity driving additional $2B in revenue. With its core human capital management (HCM) business reaccelerating, international market expansion progressing well and mid-market customers adopting Financial product, we think these positive trends could provide enough growth catalysts for the company to make its FY17 billings target without having to gain sizable traction for the Financials product within the large enterprise market. However, we believe the stock's current valuation reflects gaining sizable market share in the $27B financials app market, which requires strong traction in the enterprise market. Until that traction emerges, we believe risk/reward is not favorable at current valuation levels. Maintain Sell and $62 TP."
Shares of Workday closed at $89.79 yesterday.
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