Working day today
(As of 12/02/2024 ET)
- 52 week range
- $199.81
▼
$311.28
- P/E ratio
- 41.70
- Target price
- $288.14
Working day NASDAQ: WDAY lowered its annual forecast, which is not entirely good. However, the company still expects strong double-digit growth and continued momentum next year, so the resulting price explosion is a likely buying opportunity. The company has lowered its forecasts but remains a leader in its space, providing a scalable, turnkey financial and HR automation platform that delivers strong demand and strong growth prospects.
Consensus forecasts call for sustained income growth in the teens through the early 2030s, with margins steadily expanding. The stock is trading at a relatively high price today, but the market is still undervaluing it relative to expectations. This stock is trading below 2030 EPS estimates by 15 times. This is tremendous value for a technology company with positive cash flow, virtually no leverage, and a high likelihood of increasing returns on capital, which will lead to additional appreciation over time.
Working hours reduce management: so what? Results are good, growth is forecast
The only thing wrong with Workday’s results is the forecasts and the market’s reaction to them. However, the reduction is minor and the company expects revenue growth to remain at 15% in the fourth quarter and have strong margins, so the reduction is not too bad.
Inventory forecast for today’s business day
$288.14
Growth potential 14.59%Moderate purchase
Based on ratings from 28 analysts
| High forecast | $340.00 |
|---|---|
| Average forecast | $288.14 |
| Low forecast | $190.00 |
Working day inventory forecast details
Given this year’s trends, forecasts are likely to be cautious, and third-quarter outperformance should be in line with expectations. In the third quarter, the company generated $2.16 billion in net revenue, up 15.8% year-over-year, beating MarketBeat’s consensus estimate by 470 basis points. The growth was driven by a 15.8% increase in subscription revenue driven by new customer acquisitions, accounting for 90% of net profit.
Margin news is also good. The company increased its gross and operating margins to improve its net income leverage ratios. The company reported GAAP earnings rose about 75% and adjusted about 21% year-over-year, well above consensus. Adjusted earnings beat the consensus estimate by 730 basis points, in stark contrast to the decline forecast.
Workday’s Strong Balance Sheet Delivers Sustainable Shareholder Growth
Workday has a solid balance sheet that is well supported by cash flow and not burdened by debt. Cash balances declined in the third quarter, but this was offset by a reduction in liabilities, resulting in a 7.5% increase in shareholders’ equity, with equity growth expected as the cash balance recovers. Other highlights include low leverage (less than 1x equity, about 1x cash) and the flexibility to invest when and as needed to ensure long-term growth.
Analysts remain supportive of the market for WDAY, but have begun to lower their price targets, which could limit upside in 2024. Marketbeat tracked eight changes within the first 24 hours of publication, including numerous lower target prices and downgrade Piper Sandler to neutral. However, the consensus on the new targets is consistent with the broader consensus, and not all adjustments were lower. Morgan Stanley raised its target to $330, citing a strong quarter and long-term outlook. The late-November consensus is around $290, suggesting 20% upside from critical support levels.
Workday returns to critical support: support is here
Workday’s price pullback has brought the market to a critical support level where buying is evident. The market is already strongly recovering from its lows and is likely to continue its recovery this year. The caveat is that this market is volatile and range-bound, with the potential for solid resistance in the $265 to $275 range, just below analyst consensus estimates. This level could remain stagnant until analysts raise their targets again, which is unlikely until early-to-mid 2024.
You’ll want to hear this before you consider Workday.
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