What Do Workday’s Newly Added Risk Factors Tell Investors?


California-based Workday (WDAY) provides cloud-based finance and human resources software to enterprises. The company continues to expand through acquisitions as it pursues new growth opportunities.

Recently, Workday has agreed to acquire VNDLY for $510 million. VNDLY provides external workforce management technology and its addition is expected to bolster Workday’s human resources solutions.

With this in mind, let us take a look at the compnay’s recent financial results and understand its newly added risk factors. (See Insiders’ Hot Stocks on TipRanks)

Q3 Financial Results

Workday reported a 20% year-over-year increase in revenue to $1.33 billion for the third quarter of Fiscal Year 2022. The consensus estimate for the same was pegged at $1.31 billion. It posted adjusted earnings of $0.10 per share, which surpassed the consensus estimate of $0.86 per share. Workday ended the quarter with $3.55 billion in cash. (See Workday stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, WDAY’s main risk category is Finance & Corporate, which accounts for 44% of the total 41 risks identified for the stock. Recently, the company updated its profile with two new risks.

Under the Legal and Regulatory risk factor, Workday highlights that it is regularly involved in disputes and regulatory probes in the course of its business. The company cautions that adverse outcomes in these disputes may result in fines and have unfavorable impact on its business.

Under the Macro and Political risk factor, the company says that events related to climate change may adversely impact its business. It mentions that its facilities such as corporate headquarters and data centers are located in places that are prone to earthquakes and extreme weather conditions. Therefore, an occurrence of a natural disaster or other effects of climate change may disrupt its operations. Additionally, Workday says that it may be subject to increased regulatory requirements as a result of climate change.

The Finance and Corporate risk factor’s sector average is at 40%, compared to WDAY’s 44%. Shares of the company have gained about 20% year-to-date.

Analysts’ Take

Following Workday’s third-quarter results, Needham analyst Scott Berg maintained a Buy rating on the stock and raised the price target to $360 from $310. Berg’s new price target suggests 25.61% upside potential.

Consensus among analysts is a Strong Buy based on 25 Buys and 2 Holds. The average Workday price target of $334 implies 16.54% upside potential.

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