Workday Stock: Leading Enterprise Cloud Play Could Rally 75%

Workday Inc Represents a Long-Term Opportunity

Technology stocks have been stars recently, with the Nasdaq staging an impressive 1,700-point (15.5%) bounce after trading at 11,005 on July 14.

The return to the risk on trade has triggered strong buying across the beaten-down technology space.

Cloud software stocks, which were decimated by the earlier selling, are showing some signs of rebounding.

As the following chart shows, the Global X Cloud Computing ETF (NASDAQ:CLOU) has rallied by 20% from its 52-week low but remains off by 43% from its record high, which was achieved in November 2021.

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Chart courtesy of StockCharts.com

The Global X Cloud Computing ETF comprises some of the biggest companies in the enterprise software space. These are solid long-term companies that are leaders in their respective fields, which makes their shares compelling as potential additions to growth portfolios.

Among that group is Workday Inc (NASDAQ:WDAY), a leading provider of enterprise cloud applications used in finance, human resources, and other business processes.

Fundamentally, Workday Inc has been growing and delivering strong results. Analysts expect the company’s revenues to rise by 20.6% to $6.2 billion in fiscal 2023, followed by 19.3% to $7.4 billion in fiscal 2024. (Source: “Workday, Inc. (WDAY),” Yahoo! Finance, last accessed August 5, 2022.)

WDAY Stock Down but Could Provide Significant Returns

Similar to the rest of the stocks in the enterprise software group, Workday stock is down by 41% this year and 48% from its November 2021 high of $307.81. WDAY stock recently fell to a 52-week low of $134.10 on July 13, prior to staging a 22% rally.

While there’s no guarantee Workday stock won’t retest its recent low, its chart shows decent technical support at $140.00–$145.00.

The long-term chart below shows shares of Workday Inc breaking out from accumulation channels in 2018 and 2019, followed by hitting their record high in November 2021. At that time, WDAY stock tested its long-term support lines on several occasions and managed to hold in each case. Its recent test down to $134.00 held and then was followed by a bounce.

Chart courtesy of StockCharts.com

At this point, watch for shares of Workday Inc to hold at $140.00–$145.00.

Moving to the following two-year chart, you can see Workday stock rallying back above its 50-day moving average of $149.20.

Chart courtesy of StockCharts.com

I now expect WDAY stock to pause. What happens next will largely be dictated by the broader investor sentiment toward the technology sector.

I wouldn’t be surprised to see another downside move by shares of Workday Inc below their 50-day moving average and a possible retest of $140.00–$145.00, which would be a decent entry point.

For patient investors, the reward from Workday stock could be significant.

The horizontal blue Fibonacci retracement lines in the above chart show shares of Workday Inc stuck below their initial 61.8% retracement at $191.22. Taking this level out could drive WDAY stock toward its 50.0% retracement at $208.87, followed by $228.51 and $283.94, representing a potential move for 75%.

Analyst Take

The key to investing in the current stock market is looking for shares of solid technology companies that are leaders, like Workday Inc.

Accumulating shares of Workday stock on price dips could eventually pay major returns.