For investors, tracking a stock’s price movement over time is crucial. This factor can significantly impact your investment portfolio and help you compare returns across different sectors. The fear of missing out (FOMO) also plays a significant role in investing, especially with popular tech companies and consumer-facing stocks. Workday (WDAY), a cloud-based software provider for financial management and human resources, offers a compelling example of this.
Let’s delve into Workday’s core business drivers and understand why its stock performance has been so impressive over the past decade. Founded in 2005 and headquartered in Pleasanton, CA, Workday provides enterprise-level solutions for financial and HR needs. The company’s strength lies in its cloud-based platform, which combines finance and HR in a single system. This integration simplifies operations for organizations and empowers them with better analytical insights and decision-making capabilities. Workday’s client base spans from medium-sized businesses to Fortune 50 enterprises, reflecting the company’s broad appeal. To cater to diverse needs, Workday offers open, standards-based web-services application programming interfaces, pre-built packaged integrations, and connectors.
In the second quarter of fiscal 2025, Workday reported revenues of $2.09 billion. Subscription revenues constituted 90.9% of total revenues, while professional revenues accounted for the rest. Beyond Financial Management and Human Capital Management (HCM) solutions, Workday offers applications related to Payroll, Time Tracking, Recruiting, Learning, Planning, Professional Services Automation, and Student. The company also provides Adaptive Insights Business Planning Cloud solutions, Workday Prism Analytics, Workday Data-as-a-Service (DaaS), and Workday Marketplace. Workday Prism Analytics plays a pivotal role in business planning and fostering collaboration. It allows customers to combine Workday data with data from external sources to make well-informed business decisions. Workday DaaS, a cloud service, delivers critical data to customers, empowering them to make data-driven choices.
Workday serves a wide range of industries, including technology, financial services, business services, healthcare and life sciences, manufacturing, consumer and retail, education, and government. The company ended fiscal 2023 with over 50% of Fortune 500 companies as its customers. In the HCM market, Workday’s peers include SAP SE, Oracle Corporation, Automated Data Processing, and Ceridian, among others.
Building a successful investment portfolio requires a combination of research, patience, and calculated risk. Imagine investing in Workday a decade ago. A $1000 investment made in August 2014 would be worth $3,030.62 as of August 29, 2024, representing a gain of 203.06%. This calculation excludes dividends but includes price appreciation. Compare this to the S&P 500’s rally of 180.07% and gold’s return of 86.90% over the same period.
Analysts are bullish about Workday’s future prospects. The company reported strong second-quarter fiscal 2025 results, with both revenue and earnings exceeding Zacks Consensus Estimates. This strong performance is attributed to solid customer wins, strategic expansions, and robust contract renewals. Workday is benefiting from the growing demand for financial and human capital management (HCM) solutions across various end markets, including education, financial services, and healthcare. The company’s collaboration with Salesforce to develop an AI-powered solution is expected to enhance workplace efficiency and employee satisfaction.
However, Workday faces challenges like increasing competition in the HCM and financial management software market, which could lead to pricing pressure and hinder profitability. Continuous investments to drive long-term growth are impacting margins. Despite efforts towards international expansion, the lack of geographical diversity remains a concern. Over the past four weeks, shares have gained 14.61%. For fiscal 2024, there have been 10 higher earnings estimate revisions compared to none lower, resulting in an upward movement of the consensus estimate.
Workday’s journey highlights the importance of evaluating a company’s business model, market position, and growth potential before making investment decisions. While past performance is not indicative of future results, Workday’s strong fundamentals, strategic partnerships, and commitment to innovation position it for continued success. Investors seeking exposure to the growing cloud-based software market may find Workday an intriguing investment opportunity.
