Guggenheim: Workday Positioned For Multiyear Growth

Field checks suggest positive trends for the human resources software platform Workday Inc WDAY, according to Guggenheim.

Although Workday's 2019 results may be heavily weighted toward the back end, the company appears poised for multiyear, multiproduct growth, the sell-side firm said. 

The Analyst

Guggenheim’s Nandan Amladi maintained a Buy rating on Workday and raised the price target from $180 to $210.

The Thesis

Recent checks indicate continued positive market acceptance of cloud ERP, and consultants in North America and Europe have active pipelines of HCM and financials projects, Amladi said in a Thursday note.

A shortage seems to exist of trained Workday consultants, suggesting strong end-market demand, the analyst said. 

Workday has a history of outperforming revenue and billings estimates. As in FY18, billings in FY19 may be backend-loaded in view of the year-to-date trend, Amladi said. As deals get larger, they will take longer to close, he said. 

The company’s sales productivity has nearly doubled over the past four to five years. Yet the company has guided to subscriber revenue of only $3 billion for FY20.

This appears “very conservative,” Amladi said, adding that management may wait until their fourth-quarter 2019 call to raise the FY20 guidance, “leaving upside to play out during the year." 

Guggenheim raised its EPS estimates for FY19, FY20 and FY21 from $1.24 to $1.27, from $1.55 to $1.60 and from $2.15 to $2.20, respectively.

Price Action

Workday shares were up 0.6 percent at $188.88 at the time of publication Thursday. 

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