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Workday's Q2 Nothing To Complain About; Canaccord's Price Target Raised To $98

WDAY, Salesforce.com Inc NYSE:CRM - Workday's Q2 Nothing To Complain About; Canaccord's Price Target Raised To $98

Canaccord Genuity has raised its price target on Workday Inc WDAY 6.33% to $98 from $85 following its strong second-quarter results and upbeat guidance. The revised price target of $98 implies a potential upside of 23 percent over Wednesday's close.

Workday reported a strong set of results with upside on revenue, billings and operating profits. Moreover, Workday indicated that its head-to-head win rate versus Oracle Corporation ORCL 0.1% is north of 75 percent.

"There really wasn't anything to complain about on Workday's very good quarter and guide. In fact, Workday has done an impressive job of knocking down fears and objections to the firm's perceived outlook over the past couple of years," analyst Richard Davis wrote in a note.

Looking ahead, the company sees third-quarter subscription revenues to be within a range of $331 million to $333 million and third-quarter total revenues to be $398 million to $400 million. Workday expects total derived billings for the quarter to increase 31 percent to $445 million versus the Street's estimate of $439 million.

For the full fiscal-year 2017, Workday now expects derived billings of $1.88 billion to $1.89 billion (up from earlier outlook of $1.87 billion to $1.885 billion) and total revenue of $1.548 billion to $1.558 billion (up from $1.545 billion to $1.555 billion previously). The revenue outlook now assumes fiscal 2017 subscription revenue of $1.278 billion to $1.285 billion.

Despite high valuation, Davis recommends investors build position in Workday, as he expects the stock to approach $100 within a year. Davis has a Buy rating on the stock.

"[W]e still believe you should own at least some stock and use the inevitable stock market emotional breakdowns to build out a full position in WDAY. Tactically, we expect this stock to approach $100 within a year and perhaps sooner off of what is likely to be a well-attended and received Customer Conference the week of September 26th," Davis added.

The strong results of Workday bode well for salesforce.com, inc. CRM 2.57%, which is expected to release its second quarter numbers on August 31.

At time of writing, shares of Workday rose 5.20 percent to $83.79. Earlier in the day, the shares touched a new 52-week high of $85.96.

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DateFirmActionFromTo
Aug 2016BairdMaintainsOutperform
Aug 2016CitigroupMaintainsNeutral
Aug 2016Drexel HamiltonMaintainsBuy

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