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Shares of Workday (NASDAQ:WDAY) are trading nearly 9% higher in pre-open Wednesday after the company delivered better-than-expected earnings for its third quarter and modestly raised its full-year forecast.
Workday reported adjusted EPS of $0.99 on revenue of $1.60 billion to beat analyst expectations of $0.84 on revenue of $1.58B. Subscription revenue was up 22.3% year-over-year to $1.43B.
“There is no question that the current macro environment presents increased uncertainty, but, due to the great work of our employees and our continued innovation, we are confident in the long-term opportunity and our ability to navigate the road ahead,” said Aneel Bhusri, co-founder, co-CEO, and chairman of Workday.
Workday now sees subscription revenue between $5.555B and $5.557B with the low end of the guidance raised from the prior $5.40B. WDAY also raised its 2023 non-GAAP operating margin guidance to 19.2%.
The company announced that its Board of Directors approved a new stock buyback program of up to $500 million of its Class A common stock.
“Our updated outlook reflects the ongoing momentum in our business and the power of our business model, while continuing to balance the current environment,” the company said in a statement.
Mizuho analysts cut the price target to $200 per share from $220 to reflect the recent contraction of peer average valuation multiple.
“In our view, Workday remains in a strong position to become the preeminent vendor in the back-office suite over the longer term. We reaffirm our Buy rating,” they said in a client note.
Morgan Stanley analysts said WDAY offered “conservative” guidance, which leaves room for better-than-expected performance.
“Workday again hewed closely to the template for a successful earnings call in time of macro volatility by 1) putting up a solid quarter,2) incorporating a more difficult macro environment into the outlook, and 3) reassuring investors you will protect operating margins and FCF. With the stock trading at 4X EV/CY24 Sales or 18X EV/CY24 FCF, we see an attractive entry point to one of the core SaaS franchises in software,” they wrote in a client note.
