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Oppenheimer On Workday's Solid Q2, 'We Told You So'

WDAY | August 25, 2016

A day after Workday Inc (NYSE: WDAY) surprised the Street with a revenue beat, Oppenheimer reiterated its Outperform rating and price objective of $90. The brokerage cited a strong pipeline as its justification for the bullish rating.

Analysts Brian Schwartz, Koji Ikeda and Daniel Greenfield termed the second-quarter results as in line with their preview. Results were driven by rapid growth in leading indicators such as the billings, short-term deferred revenue, subscription and total deferred revenue. The key factor is that the company did well given the tough year-over-year quarterly comparisons.

Oppenheimer's report read, "On balance, the FY2017 billings guidance was raised by less than the 2Q billings outperformance, which possibly implies a lower 2H outlook than previous guidance, but is more likely a conservative stance taken by the new CFO."

The brokerage listed six positive factors from the second quarter:

Billings witnessed 38 percent year-over-year growth, which was 3 percent more than the consensus.
Momentum on pipeline, size and volume.
A sound start to the planning by adding 50 customers.
The second quarter was the second best quarter as far as fresh addition of customer is concerned.
Lowered CAPEX outlook.
Record APAC quarter.

On the flip side, the lead analyst pointed out that the long-term deferred revenue fell short of consensus apart from the billings outlook, implying less than 30 percent growth in the second half of the current year.

At time of writing, Workday was trading at $84.90, up 6.59 percent on the day.

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