Shares of software company Workday (WDAY) finished down in today’s trading as investors await its Q2 earnings results on August 22 after the market closes. Analysts are expecting earnings per share to come in at $1.66 on revenue of $2.072 billion. This equates to 16.1% and 15.9% year-over-year increases, respectively, according to TipRanks’ data.
This is ideal because earnings per share should grow faster than revenue, as this demonstrates a high degree of operating and financial leverage in the business. It’s also worth noting that WDAY has beaten earnings estimates for eight consecutive quarters.
And there are reasons to believe that the winning streak will continue. According to TipRanks’ Bulls Say, Bears Say tool, Workday has a solid customer base that includes most of the Fortune 500 companies. In addition, it has a growing backlog, which indicates that demand for its product remains strong. However, it is important to also consider the negatives, which include a lengthening sales cycle that potentially suggests that things are beginning to slow down.
Options Traders Anticipate a Large Move
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a large 8.15% move in either direction.
Is Workday a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WDAY stock based on 22 Buys, nine Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 3% rally in its share price over the past year, the average WDAY price target of $287.73 per share implies 23.64% upside potential.
