Workday $WDAY (Workday Inc A) Commentary, Fundamental and Technical Analysis:
Hello investors, before market openings Workday is experiencing an increase of +12% after earnings.
Here it follows a deep analysis on fundamentals and technicals to spot a good entry point and leveling our DCA.
- Let’s start with the Recent Earnings -
Workday Q2 2024 earnings exceeded market expectations both in terms of revenue and earnings per share (EPS). The company posted a 16.7% year-over-year revenue growth, reaching $2.09 billion, and an EPS of $1.75, up from $1.43 in the previous year. This strong performance was driven by increased demand for Workday's cloud-based enterprise solutions, particularly in financial management and human capital management.
Despite these positive results, the market reaction was mixed. Some analysts expressed concerns about the company's mid-teens revenue growth rate, which may not fully justify its current high valuation. Additionally, while the company is improving its operating margins, the overall margin expansion is seen as moderate, and some analysts are cautious about the long-term sustainability of these improvements.
- Fundamental Analysis -
Revenue and Earnings Growth:
- As mentioned, Workday's robust Q2 results highlight its ability to continue expanding its revenue base and improving profitability. The company's revenue is expected to grow by 17.7% in 2024 and by 15.5% in 2025, with EPS projected to increase by 33.7% in 2024.
Valuation Considerations:
- The intrinsic value of Workday is estimated around $190 per share, which is below the current market price of approximately $231.08. This indicates that while Workday is fundamentally strong, its stock might be slightly overvalued given the current growth rates. But this is related to a DFC evaluation, it is a mere indication on where the value might be sitting.
- Technical Analysis -
Price Movement and Support Levels:
▪️Following the Q2 earnings release, Workday’s stock experienced significant volatility but has maintained a trading range above key support levels. The $210-$215 range has acted as a strong support zone and is our entry point, just aligned with the 50-day moving average. The 200-day moving average near $205 provides additional support, suggesting that any pullback to these levels could offer an even bettrr entry point .
Resistance Levels:
▪️The next significant resistance levels are between $240 and $265. If Workday’s stock approaches these levels, it may encounter selling pressure unless it breaks through with strong momentum supported by further positive developments.
RSI and Momentum Indicators:
▪️ The RSI is currently around 60, indicating that the stock is nearing overbought territory. A pullback to an RSI level of around 50 would suggest a more neutral market sentiment, offering a potentially better buying opportunity for long-term investors.
Best Entry Point and DCA Strategy:
Given the current market dynamics and recent earnings performance, consider initiating a position if the stock retraces to the $210-$215 level and keep a DCA under 250$.
If you found this analysis helpful, leave a comment or a thumb up!
Best,
Andrea
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