Workday Shares Take A Dip Following Q4 Results, But Bull Thesis Still Strong

After the print Justin Furby of William Blair reaffirmed a bullish stance on Workday and maintains an Outperform rating. According to the analyst, the company's fourth-quarter report was "solid" as subscription revenue grew 39 percent and billings came in better than expected. Moreover, backlog growth of 63 percent marks an acceleration from 62 percent a year ago and EPS and operating cash flow beat the consensus estimates.

Furby also suggested that Workday's management "struck a much better tone" compared to the "somber" one last quarter.

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Why The Beaten Up Stock?

Furby further noted Workday's guidance implies a deceleration in its subscription revenue into the mid-20s after the fourth quarter of fiscal 2018. However, the analyst believes this may be conservative based on management's commentary.

In addition, Workday elected to adopt ASC 606 (a new revenue recognition standard), which does serve as a modest tailwind versus the Street — although the impact is relatively small at $3 million in 2017.

Bottom line, investors should focus on Workday's subscription growth, which continues to accelerate and the stock's breather on Tuesday doesn't deter from the longer-term bullish story.