Workday: Color on Quarter (81.60)
Stifel cuts tgt to $68 from 81. Workday delivered a solid F3Q17 beat... This was essentially the extent of the good news on the evening, however, as shares fell over 11% after-hours following management's disclosure that the company has seen a number of deals with large multi-national companies in its pipeline slip in the current quarter due to growing uncertainty around the impact from Brexit, the recent U.S. presidential election, and pending international elections. Additionally, mgmt issued an initial outlook for FY18 subscription revenue and billings growth that came in well below consensus, and adopted a much more cautionary tone around when the company's Financials offering could see a step-up function in adoption. Given these dynamics, as well as the fact they continue to believe the law of large numbers and increasing competitive pressures likely limit Workday's ability to accelerate its growth rate from current levels, they remain on the sidelines.
Wedbush cuts tgt to $77 from $82. WDAY reported a healthy 3Q beat but guidance and commentary was disappointing. Management is seeing large deals slip due to buyer caution about political developments in the U.S. and Europe. Management hopes 4Q deals will get closed but isn't certain, and the company hasn't modified its view of FY18 due to the slipped deals. Their checks suggest that buyers were indeed cautious about the U.S. election and Brexit in 3Q -- and partners are optimistic about deals in their pipeline -- but they're on guard for additional factors that might be affecting WDAY's inability to beat and raise subscription guidance meaningfully throughout FY17, for instance the potential for increased competition in WDAY's mid-tier and enterprise markets. They're on the sidelines, as they think WDAY's share gains against the entrenched ERP vendors will be hard-won, and WDAY shares are among the most expensive in their high-growth universe despite relatively meager beats and raises.
RBC cuts tgt to $85 from $102. Despite near-term deal slippage, the bigger issue is the mid-20% Y/Y sub billings guide for FY18 given expectations of 30% Y/Y. Fears over competition/ financial mgmt adoption will resurface but their view remains that WDAY has strong technology, addresses a large market and has best in class unit economics. They also think M&A valuation support is relevant.
BMO cuts tgt to $85 from $93 given lower assumed revenue growth, they are lowering their assumed valuation multiple. Their previous neutral rating on the shares was based primarily on valuation. They continue to believe in WDAY's opportunities in HCM and the financial sector, and thus they think the risk/ reward is moving to a more favorable position based on after-hours trading, but they want to gauge, as best they can, the deal pipeline and growth potential, particularly against the April quarter billings guidance
Needham notes Workday reported 3Q financial results largely in line with our cautious checks including a billings beat that remains on the low end of historical performance levels. However, they expect the co's stock to be weak over the near term as mgmt guides 4Q17 and FY18 estimates below consensus on geo-political issues delaying large deals and flexible payment terms that continue to pressure billings. Digging deeper into 3Q commentary suggests Financials traction remains behind expectations which is also likely pressuring near-term revenue expectations. They remain on the sidelines and reiterate their Hold Rating believing a slow enterprise segment and sluggish Financials sales continue to limit billings upside potential over the near term.
BTIG lowers tgt to $88 from $97.
Cowen cut tgt to $73 from $83
WDAY -14% at five month low premarket... may put additional pressure on cloud stocks this morning after the QQQ broke down yesterday.
Rem FWIW I added 10% here at 68 |
