UBS Reiterates Buy on Workday (WDAY) Ahead of 3Q Report
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UBS reiterated a Buy rating and $94.00 price target on Workday (NYSE: WDAY) ahead of the company's 3Q earnings report. UBS expects the company to deliver a slight to modest beat in the quarter. UBS also expects WDAY to provide initial FY18 guide that is typically conservative.
Analyst Brent Thill commented, "We expect WDAY to deliver another qtr of slight/modest beat. More importantly, we think 1+ F500 FM deal(s) could come through in FQ4 or early CY17. FY18/CY17 could be much more satisfying than FY17 as multiple F500 FM wins accrue, new pdts launched in Sept. contribute (Planning, Learning, Student), Platfora acquis. boosts analytics, and headwinds from deferred billings terms recede. We are comfortable with our 28.2% FY18 rev growth est. (St. 31.0%) even as we expect WDAY to provide initial FY18 guide that is typically conservative (note: F1H17 unbilled subs backlog grew well over 50% and co. reiterated goal of >50% for FY17). WDAY stock is +4.4% YTD, trailing NASDAQ COMP +7.2%, and is ~$10 below 52-wk high $93.35 (early Oct). While NTM EV/S of 9.2x is still near the top of SaaS comp grp (#3 vs. historically #1), CY17e 8.0x & CY18x 6.3x look very reasonable to us given its growth premium (NTM 32% vs. grp median 23%). We continue to view WDAY as a core holding among Cloud/SaaS platforms."
Shares of Workday closed at $83.18 yesterday.
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