Is it safe to buy Workday stock as shares plunge despite solid Q3 results?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Nov 19, 2021
  • Workday shares on Friday declined by 3.59% after reporting its most recent quarterly results.
  • The company announced its FQ3 results Thursday after markets closed, beating estimates.
  • Workday also raised its FQ4 and FY2022 guidance on subscription revenues.

On Friday, Workday Inc. (NASDAQ:WDAY) shares edged lower by 3.59% despite posting better-than-expected fiscal third-quarter results. The company reported its most recent quarterly results Thursday after markets closed, beating the consensus for analyst expectations on revenue and earnings.

Workday announced FQ3 non-GAAP earnings per share of $1.10, beating the consensus for analyst expectations of $0.86. In addition, its GAAP earnings of $0.17 per share outperformed the expected loss per share of $0.17, while revenue for the period increased by 19.8% from the same quarter last year to $1.33 billion, outperforming the consensus Street forecast by $10 million.

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The company also raised its FY2022 subscription revenue guidance to the range of $4.533 billion to $4.535 billion, representing approximately 20% Y/Y growth. It now expects FQ4 subscription revenue in the range of $1.216 billion to $1.218 billion, approximately 21% growth from last year.

Is it time to bet on WDAY growth?

From an investment perspective, Workday shares trade at a steep forward P/E ratio of 81.63, making it less attractive to value investors.

However, analysts expect its earnings per share to rise by 43.70% this year, before increasing at an average annual rate of 15.63% over the next five years.

Therefore, the stock could be an exciting option for long-term growth investors.

Source – TradingView

Technically, Workday shares seem to have recently plummeted to complete a downward breakout from an ascending channel formation. However, the stock is yet to reach oversold conditions whilst retaining a huge distance above the 100-day moving average.

Therefore, investors could target extended short-term declines at about $280.53, or lower at $268.61, while $296.75 and $308.01 are crucial resistance levels.

It is not too late to take some profits

In summary, although Workday shares are only up 32% this year, Friday’s post-earnings decline indicates a lack of short-term catalysts.

Therefore, with shares far from reaching oversold conditions, it may not be too late to take some profits.

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