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Workday's Stock Falls on New Business Headwinds Amid Pandemic

By Maria Armental

Workday Inc.'s stock fell 7% $213.62 after company officials warned that coronavirus pandemic-related uncertainty could hit bookings and, ultimately, revenue growth.

"While we have seen some recent stability in the underlying environment, headwinds due to COVID remain, particularly to net new bookings," Chief Financial Officer Robynne Sisco said in a conference call with analysts on Thursday. "And given our subscription model, these headwinds that have impacted us all year will be more fully evident in next year's subscription revenue, weighing on our growth in the near term."

Workday reported third-quarter results ahead of expectations and raised its subscription revenue projection for the year. But company officials said they expected subscription revenue backlog in the fourth quarter to grow 14% to 16%, pointing to a difficult year-ago comparison.

Canaccord Genuity's David Hynes, Luke Morison and Daniel Reagan said, "this magnitude of deceleration doesn't jibe with otherwise constructive commentary and our understanding of what's happening in the field.

"We believe the firm has become the de facto next-gen standard in core enterprise HCM," the analysts wrote using the acronym for human capital management, which refers to the human-resources services Workday offers.

The Canaccord analysts said they expect Workday to gain ground in financial management and "with a larger and improving set of adjacent products, the opportunity in planning, analytics and sourcing provides not only an additive back-to-base opportunity" but also another way to bring in customers.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

November 20, 2020 13:04 ET (18:04 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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