Wednesday, October 24, 2012

Workday Stock Price Soars to Stratosphere, For How Long?

With Workday (WDAY-$54.00) management admitting in regulatory filings that profitability is not yet within reach, investors seem fixated only on sales visibility. In the first six months of 2012, revenue grew 118% to $119.5 million. The amount of subscription contract backlog – a sign of future growth – increased $85 million to $325 million on July 31, 2012. The reported operating loss for the period, however, was $46.3 million, which management attributed to “growing pains” (higher headcount and infrastructure build-out costs).

To date, Workday has derived most of its subscription revenue from its proprietary suite of on-demand human resource applications. However, the company is looking beyond its own R&D to ensure its survival in a land of enterprise software behemoths like Oracle (ORCL) and SAP AG (SAP).

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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