Workday Stock Still 30% Below Analysts’ Top 2019 Forecast
Workday Inc (NASDAQ:WDAY) has been bullish since reporting strong third-quarter results at the end of November 2018, essentially shaking off the market-wide meltdown in December.
Workday stock has also essentially erased any losses that occurred during the broad-based slip that occurred during the first week of March.
Currently trading around $190.00, WDAY stock is up 19.1% year-to-date and is up 34.3% since late November. Despite those strong gains, the global leader in enterprise cloud applications is still 30% below analyst 2019 price targets of $250.00.
Thanks to strong fourth-quarter and year-end results and raised guidance, the 2019 outlook for Workday remains robust.
Workday Inc Overview
Pleasanton, California-based Workday Inc provides cloud-based finance and human resources software. The company’s software helps manage critical business functions, optimizing financial and human capital resources.
That may not sound exciting, but it is for investors who like making money.
The company’s customers include half of the Fortune 50 and roughly 40% of the Fortune 500, as well as educational institutions and government agencies.
|Workday Stock Information|
|Market Cap||$41.6 billion|
|Shares Outstanding||151 million|
|50-Day Moving Average||$189.10|
|200-Day Moving Average||$158.30|
(Source: “Workday, Inc. (WDAY),” Yahoo! Finance, last accessed March 25, 2019.)
Workday Inc has been bullish ever since it reported strong third-quarter results at the end of November. Investors were so optimistic about its outlook that it rebounded more quickly from the December sell-off than most tech stocks and has since gone on to record levels.
Over the last 12 months, Workday stock has risen by 45% while the S&P 500 has limped along at less than 5.4%. Since the start of 2019, WDAY stock has advanced more than 19%. Over the same time frame, the S&P 500 has grown 13% and the tech-heavy Nasdaq is up 16%.
Despite Workday posting strong fourth-quarter and year-end results at the end of February, the company’s share price slipped during the first week of March. But so did the rest of the market. If anything, the short sell-off meant Workday was in an even better trading range. It has since erased those losses.
Despite these strong gains, Workday still has lots of room to run in 2019. Of the 35 analysts tracking Workday, the median 12-month forecast predicts further upside of 8.7% in 2019 to $209.00. The highest estimate of $250.00 suggests further upside potential of 30%.
Chart courtesy of StockCharts.com
WorkDay Inc Announces Strong Q4 Results and Raises Guidance
On February 28, Workday announced the financial results for its fourth quarter and fiscal year ended January 31, 2019.
Fourth-quarter revenue increased by 35.4% year-over-year to $788.6 million. Subscription revenue went up by 37.5% to $673.5 million. The subscription revenue backlog increased by 30.1% to $6.7 billion . (Source: “Workday Announces Fourth Quarter and Full Fiscal Year 2019 Financial Results,” Workday Inc, February 28, 2019.)
Workday reported a fourth-quarter operating loss of $120.3 million compared to an operating loss of $81.3 million in the same prior-year period.
Net loss per basic and diluted share for the fourth quarter was $0.47 compared to $0.42 a year ago. Adjusted net loss per diluted share was $0.41 compared to $0.28 in the same period last year.
“We were pleased to close Q4 with strong momentum across our key subscription revenue drivers, while delivering solid operating margins and record cash flows,” said CFO and co-president Robynne Sisco. (Source: Ibid.)
Full-year revenue went up by 31.7% to $2.8 billion. Subscription revenue increased by 33.4% to $2.4 billion.
The company reported an operating loss of $463.3 million, compared to $303.2 million in fiscal 2018.
Workday reported a net loss per basic and diluted share of $1.93, compared to $1.55 in fiscal 2018. Adjusted net income was $1.36 per diluted share compared with $1.03 last year.
As of January 31, 2019, Workday had cash, cash equivalents, and marketable securities of $1.8 billion.
As the company enters its fiscal 2020, Workday raised its outlook and now expects subscription revenue of more than $3.0 billion, representing year-over-year growth of approximately 28%.
Workday Inc is a great tech stock outpacing the broader markets.
The company reported strong fourth-quarter and year-end results and raised its guidance for fiscal 2020. The company’s strong results were driven by ongoing market share gains in its human capital management business, a record number of new financial deals closed, and a record high number of new customers.
All of this suggests that a 2019 Workday stock forecast of $250.00, a gain of roughly 30% from current levels, might not be as aggressive as it seems.