Workday (WDAY) PT, Estimates Lowered at FBR Capital Following Q3 Results

FBR Capital analyst Samad Samana lowered his price target on Workday (NYSE: WDAY) to $100.00 (from $110.00) following Q3 results but maintained an Outperform rating.

Samana commented, "Workday, Inc. (WDAY) reported a strong F3Q, as revenue, billings, and EPS beat consensus estimates. Looking forward, we think management's F4Q outlook suggests momentum remains healthy in the near term. However, we believe all eyes will be on WDAY's first-blush FY16 (CY15) outlook that calls for no more than 40% revenue growth, which was below consensus expectations for 47% revenue growth. We think investors have become accustomed to guidance exceeding expectations, and the premium valuation for the shares has likely been supported by a fairly consistent string of beat-and-raise quarterly results. However, with that chain broken, the shares could potentially be volatile. While the outlook seems both surprising and disappointing, we believe this is management likely choosing to be conservative, as this time last year WDAY guided for 50% growth in FY15 (CY14) but appears to be on track to deliver roughly 70% growth. We understand for some that WDAY has likely now become a show-me story, but we believe this is a time to step back and look at the bigger picture. In our opinion, WDAY's long-term opportunity and the ability to execute on it have not changed, and as a result, we view the sell-off as an opportunity for investors to buy the weakness."

Despite the setback, the analyst remains positive on the stock on the view the company can grow faster and gain market share more quickly than anticipated as it: (1) increases penetration of its core HR offering; (2) moves into larger enterprises with its financial management applications; (3) cross-sells add-on solutions into the installed base; (4) adds new modules to its suite; (5) expands internationally; and (6) broadens its distribution capacity.

The firm is lowering FY16 revenue estimate from $1.170 billion to $1.116 billion, but raising EPS estimate from ($0.21) to ($0.10). They lowering our FY17 revenue estimate from $1.705 billion to $1.499 billion,but we are raising our EPS estimate from $0.02 to $0.12.

For an analyst ratings summary and ratings history on Workday click here. For more ratings news on Workday click here.

Shares of Workday closed at $92.49 yesterday.

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