Amazon (AMZN) decided not to proceed with a companywide rollout of the HR software provided by Workday (WDAY). Workday stock fell 3.33% to close at $230.66 on Tuesday.
Amazon halted the deployment of Workday’s HR software 18 months ago. It came as a result of a mutual agreement between the companies. Workday explained that the deal was discontinued based on Amazon’s unique needs. Still, Workday sees the potential to revisit the deal in the future.
“This was not related to the scalability of the Workday system, as we currently support some of the world’s largest organizations,” Workday said in a statement.
Although Amazon has stopped company-wide deployment, several of its units, including Whole Foods and Twitch, continue to use Workday systems.
Workday says it serves more than 8,000 customers, including more than 45% of Fortune 500 companies. It clarified that discontinuing the Amazon deal will not affect its financial outlook issued in May. (See Workday stock charts on TipRanks).
After Workday confirmed the status of the Amazon deal yesterday, William Blair analyst Matthew Pfau reiterated a Buy rating on the stock without assigning it a price target.
The analyst noted that the termination of the Amazon deal was already factored into Workday’s view of its business. Pfau further observed that ending the Amazon deployment does not raise concerns about Workday’s ability to deliver HR software solutions at scale. The analyst sees no risk to Workday’s Fiscal 2022 and 2023 estimates following the termination of the Amazon deal.
“We remain confident in our long-term thesis and expect subscription revenue growth to accelerate to 20%-plus in fiscal 2023, which we believe should drive the stock to outperform the market,” commented Pfau.
Consensus among analysts is a Strong Buy based on 11 Buys and 2 Holds. The average Workday price target of $282.25 implies 22.37% upside potential to current levels.
According to TipRanks’ Hedge Fund Trading Activity tool, confidence in WDAY is currently Very Positive. The cumulative change in holdings across all 20 funds that were active in the last quarter was an increase of 1.5 million shares.
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