Workday Earnings: Continued Strength in Renewals Shows no Sign of Slowdown; Raising Valuation

We are raising our fair value estimate for wide-moat Workday to $245 from $229 after the firm reported second-quarter results which surpassed our top- and bottom-line GAAP expectations. Following strong results in the quarter, management raised its full-year outlook for subscription revenue and profitability. With shares up around 4% afterhours, we view the high-quality stock as fairly valued. We continue to believe Workday will surpass SAP in terms of the global enterprise resource planning market share in a decade, further supported by the firm building on its momentum in the quarter.