Oppenheimer Cuts Price Target on Workday (WDAY) Following 3Q; Reiterates Outperform
Oppenheimer maintained an Outperform rating on Workday (NYSE: WDAY), and cut the price target to $88.00 (from $100.00), following the company's 3Q earnings report. Total revenue of $410M was ~$9M above consensus. EPS of $0.03 was $0.07 above consensus. Total revenue guidance of $427-430M is below the $434M consensus; and subscription revenue guidance of $360-363M is below with the $366M consensus.
Brian Schwartz commented, "We reduce our WDAY price target to $88 from $100 due to a lower valuation multiple driven by CY2017 subscriptions billings growth expectations below our estimates, which also causes downward estimate revisions in our forecast. Management highlighted an increasing uncertainty among large multi-national businesses from macro events (US election, Brexit, other upcoming European elections, etc.) as the primary reason for elongating sales cycles, though we think that slow enterprise market adoption of SaaS financial management products is also a primary culprit behind the soft subscription-billings guidance. Bottom Line: We expect the Street to reassess Workday’s valuation with tech currently out of favor and from the disappointing guidance, and think WDAY could find valuation support near $70 at ~25x CY2018 OCF vs. mid-20s subscription billings growth guidance and ~5.5x 2018 sales for a 25-30% recurring subscription revenue growth business."
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Shares of Workday closed at $81.60 yesterday.