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Workday Stock Wavers On Mixed Revenue, Margin Guidance At Analyst Day

Workday stock wavered in the wake of its analyst day, where the enterprise software maker outlined its plans to grow subscription revenue by more than 20% post-fiscal 2022, a target slightly above consensus estimates.




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Pleasanton, Calif.-based Workday (WDAY) hosted the virtual analyst day on Tuesday. Workday stock rose 1.5% to 274.13 in morning trading on the stock market today. Workday stock had edged down earlier. WDAY stock popped in late August on better-than-expected June-quarter earnings.

The company sells software for human capital management, or HCM, such as payroll tools. It has expanded into financial management software.

Workday forecast 30%-plus growth in financial software and high-teens growth in human capital management, analysts said.

“Applying a 20% compound annual growth rate from fiscal 2022 implies about $9.4 billion in fiscal 2026 vs. $4.5 billion in fiscal 2022,” Cowen analyst J. Derrick Wood said in a report. Analysts had projected 19% subscription revenue growth.

Workday Stock: Margin Guidance Disappoints

Fiscal 2022 ends on Dec. 31, 2021. Workday said it expects international markets to account for 30% of subscription revenue by fiscal 2026, up from 24% now.

Workday’s near-term margin guidance came in below views.

“While fiscal 2023 operating margin guidance of 18% (vs. consensus of 20%)  disappointed investors, management reiterated 25% operating margin at $10 billion revenue run rate,” Mizuho Securities analyst Siti Panigrahi said in a report.

At Morgan Stanley, analyst Keith Weiss said in a report: “Management highlighted an expanding product portfolio combined with go-to-market investments. Workday remains well positioned in human capital management, with greater than 60% of new HCM annual contract value coming from outside of the core HCM solutions.”

Workday stock trades below an entry point of 282.87. WDAY stock holds a Relative Strength Rating of 70 out of a possible 99, according to IBD Stock Checkup.

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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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