古根海姆升级Workday以改善核心业务前景

Workday (NASDAQ:WDAY) was upgraded by Guggenheim on Wednesday, citing the potential for improving prospects in its core business.

Shares rose 9% in premarket trading after the company unveiled a new $4B buyback program and activist investor Elliott Management disclosed a $2B stake.

“We are upgrading the shares of WDAY to Buy from Neutral and are introducing a Price Target of $285 based on our DCF,” Guggenheim analyst John DiFucci wrote in a note to clients. “We have viewed WDAY as a 'Nice House in a Tough Neighborhood,' as management is 'Controlling What They Can' to better position the company for the future, while struggling to offset pressure on its core business. WDAY’s traditional core business is usually part of large transformational HCM projects that cost millions of dollars and often take years to complete, and those projects are a low priority in today’s IT spending environment.”

DiFucci said that when the spending environment improves, Workday should be “well-positioned” to boost growth, given it's a “better company than it was just a few years ago.”

“It has engaged more intimately with partners, is expanding internationally, has had some success going down-market, and has acquired new human talent and technology that has fueled growth and should continue to,” DiFucci explained.

He continued: “WDAY is growing double digits and will likely continue to for the foreseeable future, even if the environment remains relatively stagnant. It’s also trading at just over 20x EV/ [next 12 months free cash flow]. We’ve written about the inherent incremental cost to run WDAY’s proprietary infrastructure, which could suppress its long-term FCF margins and while this still applies, it may be less of a cost than we had previously thought. Finally, we believe that if the core asset of any Software company is its people; this is a team we’re comfortable supporting.”