SAP - Workday: Superior Fundamentals But Stock Doesn't Have Significant Upside Left
2024-03-31 12:52:21 ET
Summary
- Workday is a provider of enterprise cloud applications for finance and human resources that has underperformed the S&P 500 and Nasdaq 100 YTD.
- The company is focusing on driving international expansion, building a robust partner ecosystem, and integrating AI into its platform to drive customer acquisition and adoption, while growing its margins.
- Despite solid fundamentals, the stock presents just 12% upside based on my valuation, which I believe doesn’t provide a reasonable entry point, making it a “hold” for now.
Introduction & Investment Thesis
Workday (WDAY) is a provider of enterprise cloud applications for finance and human resources. The stock has underperformed the S&P 500 and Nasdaq 100 YTD. The company released its Q4 FY24 earnings report last month, where revenue and earnings exceeded expectations. It is projected to grow its revenue by 15–16% to approximately $8.4B in FY25 as it continues to focus its efforts on expanding internationally while building its partner ecosystem in order to grow efficiently through referrals, co-selling, and building differentiated solutions in order to drive better business outcomes for its customers. At the same time, the company is also investing its resources in integrating AI capabilities on its platform, along with the announcement of its acquisition of HiredScore, in order to accelerate its AI product roadmap. Meanwhile, Workday’s profitability is growing along with expanding margins as it streamlines its operating expenses....
Workday: Superior Fundamentals, But Stock Doesn't Have Significant Upside Left