Raising Our Fair Value on Workday

Workday hit some notable metrics this quarter, reporting that 35% of the Fortune 500 and 50% of the Fortune 50 utilize Workday for core HR. However, the firm reiterated on its conference call that it is no longer just an HCM vendor, as HCM only accounts for 25% of the firm's total addressable market due to the immense TAM for its financial management tools. For the quarter, financial management had 60% new customer growth. With Adaptive Insights, Workday's plan is to both offer the tool as a stand-alone product or an add-on in the firm's enterprise resource planning suite. We applaud the firm for its incremental investments in ERP, which have paid off. We think there is credence to the idea that enterprises are becoming more comfortable with a cloud-based financial management tool, benefiting Workday.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.