UPDATE: Brean Capital Cuts Workday (WDAY) to 'Sell' as Checks Show Headwinds

May 9, 2016 6:59 AM EDT
Get Alerts WDAY Hot Sheet
Price: $184.23 -0.87%

Rating Summary:
    36 Buy, 22 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 10 | Down: 31 | New: 13
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(Updated - May 9, 2016 9:57 AM EDT)

Brean Capital downgraded Workday (NYSE: WDAY) from Hold to Sell with a price target of $55. Analyst Yun Kim said checks indicate headwind fpr its financial app business.

Kim explained, "Our specific checks into WDAY's Financial Management application business indicate that a certain portion of its target customers (including software companies) is expected to undergo a major accounting change over the next couple of years, which effectively make it difficult for them to migrate from their current financial system to a new one during such major transition. Simply put, we believe many companies affected by the implementation of new accounting change are unlikely to adopt a new financial system (including WDAY's), which could introduce additional risks and complexities on top of what they are already facing."

"In our view, the investment community has not fully accounted for this fundamental headwind that WDAY could potentially face as it tries to ramp its Financial application business starting this year. While we remain optimistic regarding WDAY's long-term fundamental growth prospects, we are adopting a more cautious view in the near term, especially in regards to the Financial application business. Hence, we are lowering our rating to Sell with a $55 TP from Hold and reducing our estimates for the current year and next year to reflect potentially slower ramp of its Financial application business, which we believe is the single most important driver of the stock this year," added the analyst.

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 $70.97 yesterday.

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