Workday "Unsure This T+1 Rally Will be Sustained" (Neutral) Keirstead

Research evidence excerpt

Workday "Unsure This T+1 Rally Will be Sustained" (Neutral) Keirstead

Forecast returns

Forecast price appreciation 14.9%

Forecast dividend yield 0.0%

Forecast stock return 14.9%

Market return assumption 9.1%

Forecast excess return 5.8%

Company Description

Based in Pleasanton, CA, Workday is a leading provider of cloud-based software for back-

office business functions. Workday started in Human Capital Management and has since

expanded its product suite to include Financial Management (accounting, planning,

procurement), Analytics, and other offerings that complement its core products, catering to

the large enterprise and mid-market customer segments in the US and abroad.

Valuation Method and Risk Statement

Our PT is based on an EV/FCF multiple for Workday. Risks include: 1) Higher levels of

penetration in Workday's core market (Cloud-based HCM), which as deals become more

competitive between SAP, ORCL and WDAY, there could be a higher level of price discounting

in the market to win deals, affecting margins/reported results and/or bookings, 2) the market

for cloud-based Financials may remain on-prem for a prolonged period of time affecting

Workday's reported growth if Workday Financials is not able to gain meaningful traction in

the market place, 3) the macro environment remains more challenging compared to pre

COVID-19 times, which presents additional selling challenges to the company, 4) increased

competition in cloud-based Financials, as our checks actually cited an uptick in Oracle's

cloudbased Financials offering, 5) while Workday Financials has had success in the mid-

market, the company's push into larger enterprises poses new challenges to the company's

sales motion, and 6) shareholdings and voting power is concentrated in company co-

founders.