RBC Remains Bullish On Workday After Meeting With Management

Discussions with top management at Workday Inc (NASDAQ: WDAY) indicate a large market opportunity, an increase in adoption of core financials and the expansion of the financial planning segment, according to RBC Capital Markets.

The Analyst

RBC Capital Markets’ Ross MacMillan maintains an Outperform rating on Workday with an unchanged $220 price target.

The Thesis

The on-demand financial and human capital management software vendor has a customer base of 2,600 companies, MacMillan said in a Tuesday note. 

The company indicated there are an estimated 35,000-38,000 companies globally that would consider Workday’s products as viable solutions, the analyst said. 

Although 40 percent of Fortune 500 companies are using Workday for HCM, most of the remaining 60 percent are yet to move to cloud HCM, MacMillan said. 

The company added 79 core financials customers in the fourth quarter, four of which are Fortune 500 companies, he said. 

The improved adoption of core financials is being driven by several factors, including customers becoming increasingly comfortable putting core financials in the cloud; the product’s maturity; enhanced vertical capabilities; and a larger reference customer base, according to RBC. 

Workday believes the financial planning market is almost as large as the core financial management market, MacMillan said.

“As companies push more performance responsibility down to line managers, a planning tool integrated with the core financials transaction engine will drive agility in organizations and elevate the value of an integrated platform.”

Price Action

Workday shares were trading down slightly at $187.22 at the time of publication Wednesday. 

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Photo courtesy of Workday.