Workday Up 17% in Past Year: Reason to Buy WDAY Stock? – 15 November 2024

On By Littum

Bolstered by improved market demand across its portfolio, Workday, Inc. (WDAG – Free Report) has risen 17.1% over the past year compared to industry growth of 46.3%, outperforming peers such as Cadence Design Systems, Inc. (CDNS – Free report), but lags SAP SE (SAP – Free report).

Workday is poised to benefit from strong demand for its Human Capital Management (HCM) and financial management solutions. The company’s cloud-based business model and expanding product portfolio have been the primary growth drivers. In addition, the growing number of Workday Prism Analytics and Adaptive Insights business planning cloud offerings promise.

One-year price performance

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WDAY Runs on Portfolio Strength

Workday’s HCM suite of applications has witnessed solid growth momentum, driven by organizations’ move to the cloud. A constant flow of customers shows high customer satisfaction, which bodes well for its long-term business model. Workday is also gaining traction in the international market, driven by higher digital transformation initiatives across finance and human resources domains, in step with the changing market conditions.

The company is expanding its portfolio beyond core HCM solutions into the financial domain. It adapts them to various industries and verticals such as education, public and financial services, among others. This has helped it experience strong renewals and expand its customer base as business enterprises aim to consolidate consumption and improve efficiency levels. This bodes well for the company’s long-term growth.

WDAY offers a healthy outlook

Workday has experienced steady revenue growth over the years, highlighting the diversity and robustness of its product portfolio. Along with several new customer acquisitions, the company has made several strategic expansions and contract renewals within its existing customer base. Workday also recorded solid traction among government customers.

For fiscal year 2025, the company expects subscription revenue in the range of $7.700 billion to $7.725 billion, suggesting 17% year-over-year growth. Professional services revenue is expected to be in the range of $680-$690 million. The non-GAAP operating margin is expected to be 25.25%. Capital expenditure is estimated to be around $330 million.

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WDAY Bets Big on AI

Management is focusing heavily on integrating advanced AI (artificial intelligence) and ML (machine learning) capabilities. The ongoing AI-driven product development emphasizes natural language generation, content search, summarization, content augmentation and document understanding.

Workday has entered into a collaboration with Salesforce, Inc. (CRM – Free report) to revolutionize workplace efficiency and employee satisfaction. Together, these industry leaders are poised to unveil a breakthrough AI employee service agent designed to automate tasks, provide personalized support and deliver data-driven insights across organizations.

The acquisition of AI-powered talent orchestration solutions, HiredScore, reflects a broader policy of making AI a core element of its product offering. This strong focus on AI prowess will increase its market differentiation, increase up-selling and cross-selling opportunities, and strengthen Workday’s position in the finance and human resource management market.

Workday recently entered into a definitive agreement to acquire the leading AI-based Document Intelligence Platform Evisort for an undisclosed amount. With this buyout, WDAY aims to integrate Evisort’s AI-native solution across its finance and human resources solution suite. This will improve the availability of information and speed up the process of data extraction, enabling WDAY customers to transfer accurate financial or operational details directly to the Workday platform in a matter of seconds.

Estimate revision trend for WDAY

Workday earnings estimates for 2024 have improved 7.7% to $6.97 over the past year, while the same for 2025 has risen 7.5% to $8.21. The positive estimate revision shows optimism about the share’s growth potential.

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Final note

With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, Workday appears to be a solid investment proposition. A strong emphasis on quality, careful execution of operational plans and continuous portfolio improvements create additional value for customers.

The stock delivered a trailing four-quarter average earnings surprise of 9.1%. Workday currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On the back of a robust earnings surprise history and a favorable Zacks Rank, it appears poised for further share price appreciation. Therefore, investors are likely to profit if they bet on this high-flying stock now.