Citing recent industry checks, Loop Capital analyst Yun Kim upgrades Workday (NASDAQ:WDAY) from Sell to Buy and raises the price targetfrom $180 to $320, a 21% upside to the last close.
The checks showed a “significant increase” in large HCM deals, which could add fuel to Workday’s revenue growth.
Kim notes that the previous Sell rating was based on previous checks indicating that large HCM replacement deals were slowing well ahead of the pandemic’s start last year.
Kim: “Given that WDAY remains heavily dependent on such large HCM deals to drive growth (we estimate about HCM drives 75+% of its subscription revenue), we were wary of multiple compression if its revenue growth slows to a level well below 20%.”
The latest checks “more fully reflect the largeorganizations’ finalized IT budget plans for 2021” and “point to a surprising turnaround in its largenHCM deal activity, especially in the U.S.”
Post updated with additional details from the analyst note.
Workday shares are up 1.9% pre-market to $269.
Last month, Workday was among the Buy-rated stocks as Goldman Sachs initiated coverage of cloud software names.