Workday’s (WDAY) stock price has crawled back after tumbling to $200 in August as the unwinding of the Japanese yen carry trade occurred. It has bounced back to $270 and is hovering near its highest level since April 8 ahead of its upcoming earnings.
Workday had been a top performer
Workday is one of the biggest software companies globally, offering important solutions like human resources, payroll, planning, and analytics. It is used by over 10,000 customers globally, a figure that is continuing to grow. Its clients include about 60% of all Fortune 500 companies, with some of the recent wins including Lowe’s, GE Vernova, Ryder, and Cushman & Wakefield.
Workday’s performance has been strong over time as it added more clients and new products. Its annual revenue jumped from $3.6 billion in 2019 to $7.2 billion in the last financial year. It has also become a highly profitable company, with its annual profit jumping to $1.3 billion, a figure that will continue improving.
Workday has benefited from various themes in the past few decades. For example, it has incorporated artificial intelligence in its operations, helping to boost its clients’ productivity. Companies using its AI solutions can improve the hiring process, save time, and easily hire qualified individuals.
Workday’s other benefit is that it has little churn in its operations. Once a company like Salesforce becomes a client, there is little chance that it will move to another provider unless of a major issue. As such, in most cases, Workday’s churn is usually less than 1%.
The other benefit is that it operates in an industry with a large addressable market. The human capital sector is a $58 billion market, while the corporate financial segment is an $84 billion one.
WDAY earnings ahead
The Workday stock price will be in the spotlight this week as it publishes its financial results. The most recent numbers showed that the company’s growth was still strong, helped by its subscriptions. Revenue jumped by 16.7% to $2.085 billion as subscriptions jumped to $1.9 billion.
Workday’s backlog continued rising, with the 12-month rising to $6.80 billion and the total one reaching $21.58 billion. Its operating cash flow was $571 million, higher than the $425 million it made last year.
Analysts expect that Workday’s business continued to do well last quarter. Precisely, the average revenue estimate is $2.13 billion, a 14.2% increase from the same period last year. The highest estimate is $2.15 billion, while the lowest one is $2.11 billion.
Workday’s forward revenue guidance for the fourth quarter will be $2.2 billion, bringing the annual figure to $8.4 billion. In terms of earnings, analysts see Workday’s EPS rising to $1.76 and the annual one reaching $7.7. Chances are that Workday’s earnings will be higher than estimates as it has done in the past few years.
Workday stock price analysis
WDAY chart by TradingView
The WDAY share price has bounced back in the past three months and moved above the key psychological level at $250. It has formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. In most periods, this is one of the most bullish signs in the market.
Workday shares have also moved slightly above the key resistance level at $266.4, its highest swing on August 6. The Relative Strength Index (RSI) and the MACD indicators have also continued rising.
Therefore, there is a likelihood that the Workday stock price will continue rising as bulls target the next key resistance at $300. Still, there are concerns about its valuation. Its rule of 40 figures, which is made up of the net income margin and revenue growth, stands at 35. Also, Needham analysts recently lowered their WDAY stock forecast.
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