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Workday Inc WDAY

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Morningstar’s Analysis

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Workday Posts a Good Finish to Fiscal 2021 and Approaches its Fair Value With Tech Selloff

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

Wide-moat Workday posted strong fourth-quarter results, as revenue and adjusted EPS both exceeded our expectations. During a challenging year hampered by pandemic-induced demand slowdowns, the company's performance underlines our continued thesis on the resiliency of Workday's business model. Workday's human capital management, or HCM, software played a crucial role in its overall strength, with many enterprises embarking on digital transformation journeys. However, management does forecast slower growth for subscription revenue in fiscal 2022 due to a lag in recognition. Due to the time value of money as we roll our valuation model, we are raising our fair value estimate for wide-moat Workday to $219 per share from $198 per share. Combined with Workday stock falling 7% upon the news, Workday is approaching our fair value, and is within 3-star territory. We think this could mark a nice opportunity for investors considering that many other high-quality software stocks within our coverage remain overvalued, despite the tech sell-off.

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Company Profile

Business Description

Workday is a software company that offers human capital management, or HCM, financial management, and business planning solutions. Known for being a cloud-only software provider, Workday is headquartered in Pleasanton, California. Founded in 2005, Workday now employs over 12,000 employees.

6110 Stoneridge Mall Road
Pleasanton, CA, 94588
T +1 925 951-9000
Sector Technology
Industry Software - Application
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 31, 2022
Stock Type Speculative Growth
Employees 12,500