Wedbush Upgrades Workday (WDAY) to Neutral
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Wedbush upgraded Workday (NYSE: WDAY) from Underperform to Neutral with a price target of $82.00 (from $69.00).
Analyst Steve Koenig commented, "Our upgrade of WDAY shares is based on a more positive perception of potential 2H sales activity, following a 1H which we think wasn’t as good as generally believed. Our integrator checks and analysis suggested that the start of the year didn’t live up to WDAY’s expectations. Growing deal sizes and customer budget cycles may be partly to blame, along with potential macro-related buyer caution. However, our conversations with integrators at Workday Rising yesterday suggest that 2H activity could be picking up; these comments mirror management’s confident and relaxed tone at WDAY’s analyst meeting. Also, although hoped-for acceleration in 2H deal activity is uncertain, we no longer see failure to meaningfully beat and raise guidance for subscription revenue as a sufficient downside catalyst for WDAY shares, based on the positive market reaction to WDAY’s 1Q and 2Q results. Also, slow progress in signing Fortune 500 financials customers doesn’t look like a downside catalyst either. The factors that are likely supporting WDAY’s above-peer 8x EV/ revenue on CY17/FY18 estimates look intact, at least for now; these include: (a) a perception that WDAY could sell itself at a premium; (b) favorable market sentiment towards high-beta/ growth software; and (c) a positive investor view of WDAY management’s credibility and trustworthiness. Accordingly, we are stepping to the sidelines."
Shares of Workday closed at $89.79 yesterday.
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