Workday gets double-notch upgrade at Loop on positive large deal checks

  • 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.

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