Guggenheim Sees 'Unfavorable Setup' for Workday (WDAY) EPS

August 19, 2022 7:01 AM EDT
Get Alerts WDAY Hot Sheet
Price: $170.99 +0.89%

Rating Summary:
    35 Buy, 23 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 2 | Down: 23 | New: 24
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Guggenheim analyst John DiFucci reiterated a Sell rating and $134.00 price target on Workday (NASDAQ: WDAY) ahead of results expected on August 25th. The analyst sees an "unfavorable setup."

The analyst commented, "We believe that the setup for WDAY entering its F2Q23 is unfavorable, especially given its performance in F1Q23 and what we view as a challenging macro backdrop for big transformational projects. At the same time, if it were to close the very large deals that slipped from F1Q23, it could meet or exceed F2Q23 consensus expectations, but there’s still risk in the annual guide and in the company’s longer-term goals to be a 20% grower. We estimate that WDAY’s F2Q subscription revenue guidance of 22% y/y implies 10% New Subscription ACV growth y/y off a tough comp from last year, and relative to a 16% decline in New ACV in F1Q23. We also believe that FY23 guidance for 22% subscription revenue growth, which implies 25% full-year New Subscription ACV growth by our estimates, is at risk, especially if macro conditions remain challenging. WDAY is coming off its smallest subscription revenue beat vs. consensus in over two years (0.5% in F1Q) and missed F1Q23 consensus billings expectations by over 3%. F1Q weakness was affected by slippage of two large deals that management was confident would close in F2Q, which we assume in our model, but even so, the new business hurdle seems high. Shares have rallied 30% off the lows in June vs. 19% for IGV and 14% for the S&P 500."

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 $173.13 yesterday.

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