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Workday: Strong Execution Set to Continue in Q3, Says 5-Star Analyst

Last week was an excellent one for investors of Workday (WDAY). The stock gained a hefty 27%, culminating in a 13% rise on Friday, as Wall Street applauded the enterprise software specialist’s strong second quarter results.

In fiscal 2Q21, Workday reported revenue of $1.06 billion, a 19.4% year-over-year increase and $20 million above consensus. The company posted a beat on the bottom-line too, as non-GAAP EPS came in at $0.84, $0.18 ahead of the Street’s forecast. Additionally, subscription services grew by 23%, reaching $931.7 million.

Looking ahead, the company raised its full-year guidance. Workday now anticipates fiscal 2021 subscription revenue to land between $3.73 billion to $3.74 billion, boosted from the previous forecast of between $3.67 billion to $3.69 billion.

The estimate-beating report was given a thumbs up by Monness analyst Brian White.

“We believe Workday will emerge from this crisis stronger given its differentiated SaaS position with leadership in the HCM market and strong growth in Financial Management, combined with a positive contribution from Adaptive Insights and new opportunities with Scout RFP... With the strong secular cloud trend, Workday’s strong position in the SaaS market with an expanding portfolio and a subscription-based model, we believe investors will continue to pay a premium for the stock,” White opined.

Accordingly, White bumped up his estimates too. For fiscal 3Q21, White increased his overall revenue forecast from $1.025 billion to $1.085 billion and raised the EPS projection from $0.49 to $0.67. For FY21, the revenue forecast is lifted to $4.262 billion, from $4.166 billion, and the analyst now expects EPS to come in at $2.51 (up from the previous $2.18 call).

Bottom line, what does it mean for investors? The Buy rating stays put but the price target gets a raise. The figure moves from $215 to $280, implying upside of 17% could be in the cards over the next 12 months. (To watch White’s track record, click here)

White’s colleagues take a more measured approach. Based on 12 Buys, 11 Holds and 2 Sells, Workday has a Moderate Buy consensus rating. Going by the $246.72 average price target, the analysts expect shares to remain range bound for the foreseeable future. (See Workday stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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