We came across a bullish thesis on Workday, Inc. (WDAY) on Twitter by TechFundies. In this article, we will summarize the bulls’ thesis on WDAY. Workday, Inc.’s share was trading at $244.48 as of Oct 18th. WDAY’s trailing and forward P/E were 42.15 and 29.24 respectively according to Yahoo Finance.
An employee working in a modern office space, overseeing software-as-a-service solutions.
Workday’s analyst day didn’t bring many surprises, but it reinforced the company’s growth prospects and strengthened its risk/reward profile. Notably, FY27 guidance was formalized, and Street estimates moved higher. The Human Capital Management (HCM) platform grew 17% year-over-year, adding $770M in net new revenue, while the Financial Management (FINS) platform grew 21%, though its deceleration from 26% CAGR over the past two years is a concern. Despite slower growth in FINS due to long sales cycles and tougher competition, the product remains strong. Workday’s diverse growth drivers include its full suite now representing over one-third of new deals, with medium enterprises contributing 50% of net new business, bolstered by new bundling strategies. Partners have also become a key contributor, generating 9% of net new business, up from less than 3% a year ago.
International expansion, which accounts for 25% of Workday’s business but 50% of its total addressable market, has improved thanks to strategic partnerships for payroll solutions. The company’s product attach rates are solid, supporting its platform story and providing continued growth potential. FY27 guidance projects a 15% CAGR, 30% operating margin, 30% free cash flow (FCF) margin, and decreasing stock-based compensation (SBC), positioning the company for further leverage beyond FY27. Management’s disciplined approach and steady growth are expected to drive FCF growth in the 20% range, offering substantial upside (60% to 30x CY27 FCF). While the stock appears expensive when excluding SBC, bulls argue that SBC will continue to decrease, especially as AI-driven productivity reduces hiring needs and wage pressure.
Workday, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 86 hedge fund portfolios held WDAY at the end of the second quarter which was 83 in the previous quarter. While we acknowledge the risk and potential of WDAY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WDAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.