On October 2, Stifel Nicolaus upgraded Workday to Buy from Hold citing an improving demand environment for cloud-based human capital management (HCM) systems.
Stifel Nicolaus analyst Brad Reback also raised Workday’s (WDAY) price target to $275 (25.6% upside potential) from $227. Given the improving macro environment and demand for HCM solutions, Reback believes that Workday is set to gain market share. In a note to investors, the analyst said that the company has an opportunity to sustain a mid-to-high teens HCM growth in coming years.
On August 27, Workday reported strong year-over-year improvement in its 2Q top and bottom-line results, reflecting robust demand for its cloud-based HCM and financial management solutions. The company’s revenues grew 19.6% to $1.06 billion year-over-year and surpassed analysts’ expectations of $1.04 billion. Its adjusted EPS jumped 90.9% to $0.84 year-on-year and beat Street estimates of $0.65. (See WDAY stock analysis on TipRanks)
Workday’s co-CEO Aneel Bhusri commented: “It was a strong quarter despite the environment, with continued demand for our products as more organizations realize how mission critical cloud-based systems are in supporting their people and businesses through continuous change.”
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 14 Buys, 9 Holds and 2 Sells. With shares up over 33% year-to-date, the average price target of $250.52 implies a further upside potential of about 14% to current levels.
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