Workday (WDAY) Gains on a Beat-and-Raise Quarter, Analysts Positive
Shares of Workday (NASDAQ: WDAY) are up more than 7% in pre-open Friday after the company delivered better-than-expected Q2 results.
WDAY said it made Q2 EPS of $1.23 to easily top the analyst estimate of $0.78. Revenue for the quarter came in at $1.26 billion versus the consensus estimate of $1.24 billion.
“This quarter was one of our strongest in company history. Our customer community has grown to more than 55 million users and more than half of the Fortune 500 have selected Workday,” said Aneel Bhusri, co-founder, co-CEO, and chairman, Workday.
“We delivered an incredibly strong Q2, driven by exceptional execution against a rapidly improving backdrop,” added Robynne Sisco, president and chief financial officer, Workday.
The company raised its fiscal 2022 guidance for subscription revenue to a range of $4.50 billion to $4.51 billion, implying a growth of 19%. For the current quarter, WDAY is projecting subscription revenue of $1.156 billion to $1.158 billion, signaling 20% growth at the high end.
Morgan Stanley analyst Keith Weiss raised the price target to $310.00 per share from the prior $305.00 on the Overweight-rated WDAY as “patience pays off.”
“Workday heads into the back half of FY22 with significant top-line momentum and as a stronger company given: 1) a more evenly weighted go-to-market strategy across new customers and up-selling to existing customers, 2) a broader solution portfolio to bring new customers in the door and up-sell to the customer base, and 3) customers accelerating the adoption curve and priority level for core financials coming out of the Covid crisis. Ramping top line growth in the back half likely returns Workday to operating solidly above the 'Rule of 40' level, which should drive the multiple (and shares) higher given the current 10x EV/CY22 Sales multiple or 0.57X EV/Sales/Growth versus the large cap average of 0.72X. As such, we remain buyers with our $310 price target,” Weiss wrote in a note sent to clients.
BofA analyst Brad Sills also raised the price target to $310.00 per share from the prior $300.00 on “solid Q2 upside/outlook.” The analyst has weighed in on the outlook to note:
“Commentary on strong planning and procurement sales to new and existing customers suggests that the strategy to surround many account with value added FINS module places Workday is a good position to win the core FINS over the near and longer term. While Q2 operating margin upside (23.2% vs our 20%) points to meaningful operating leverage, commentary suggests a more muted expectation for near term margin, given plans to catch up on hiring and a compensation plan shift to cash versus stock, likely to weigh on FY22. We believe that hiring is justified, given accelerating pipelines across HCM and FINS.”