Workday BUY

WDAY : NYSE : US$100.28 
BUY  Target:  $ 115


Workday provides enterprise-scale, cloud applications that deliver the core functions for global customers to manage the human capital and financial resources of an organization. Solutions include: HCM, Financial Management, Payroll, Time Tracking, Procurement, Employee Expense Management, etc. Workday was founded by the former founders of PeopleSoft in 2005 and is headquartered in Pleasanton, CA.S$115.00

Technology — Enterprise Software — Software as a Service STRONG QUARTER AND CONTINUED INVESTMENT. BUY, TARGET TO $115.
Workday’s continued business momentum and upwardly revised outlook were strong enough to keep investors’ “eyes on the prize” – which in this case, is about becoming a multi-billion revenue cloud-based replacement of incumbent applications from Oracle, SAP and the high end accounts of the largely PE funded firms like Infor, etc. It would be too aggressive to forecast that WDAY’s share price will generate 2x the return of the stock market, but it seems reasonable that 56% compound revenue growth from C2013 to C2015E will more than offset a nearly certain degradation of the firm’s 22x forward EV/revenue multiple. We would own at least a small position in this stock. BUY.
 The track record remains perfect: another big upside. Workday reported revenues, calculated billings, and FCF of $141.9M (+74%), $203.7M (+78%) and $7.5M, which were respectively $3.9M, $29.5M, and $31.2M ahead of our estimates. Subscription revenues grew 86% in the quarter, and non- GAAP EPS loss of ($0.13) was $0.02 better than we expected.
 Color from the call. Customer momentum continues as the firm added roughly 50 customers in the quarter (bringing the total to ~600), including the second straight quarter of “double digit” Financials additions. WDAY also recently acquired Identified, a small technology tuck-in that will add predictive analytics and machine learning capabilities to the firm’s apps.
Outlook: revenues move higher on bookings strength, F2015 operating losses in the mid-teens as WDAY continues to invest for growth. We have increased our F2015 and F2016 revenue estimates by $35M and $60M respectively, which now implies 56% and 42% growth in the next two years. F2015 calculated billings growth is expect to come in at ~45%, which is up from our previous 43% estimate. We have slightly increased our assumed operating losses in F2016 and expect WDAY to be FCF positive in F2017.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s