Market bullish as Workday heads towards Q2 earnings

Workday (Nasdaq: WDAY) will report second-quarter 2020 financial results after the regular trading hours on Thursday, August 29. The market is quite bullish on the stock and expects higher earnings and revenues, driven by strong demand for its enterprise cloud applications.

The Pleasanton, California-based firm is expected to report $872.31 million in second-quarter revenues, up 30% year-over-year, primarily driven by strong subscription revenues.

In the first quarter, Workday’s subscription revenues grew 34%, to $701 million and accounted for 85% of its total revenues. For the second quarter, the management has projected another 32% growth in subscription revenues in the range of $746 to $748 million.

Analysts expect the human resource software provider to report earnings of $0.35 per share, four cents higher than a year ago. Notably, in all four trailing quarters, the company has surpassed earnings expectations.

During the first quarter, Workday reported adjusted earnings of $0.43 per share and revenue of $825 million that beat analysts estimates of $0.41 profit per share and $813.9 million in revenue. The company also raised its full-year outlook for subscription revenue to $3.045 to $3.060 billion, from the earlier projection of $3.030 billion to $3.045 billion.

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WDAY shares have gained 20% in the year-to-date period, compared to 23% growth achieved by the industry.

The stock has a 12-month average price target of $9.79, which is at a 22.8% upside from the last close. Earlier this month, two research firms, Mizohu and Compass Point, initiated coverage on the stock with Buy ratings.  

Mizuho said the company’s cloud and analytics platforms are game-changers that have the potential for $1 billion valuations.

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