Home News Workday Stock Is Rallying. Demand for HR Software Is Growing.

Workday Stock Is Rallying. Demand for HR Software Is Growing.

Workday Stock Is Rallying. Demand for HR Software Is Growing.

Workday stock jumped to a new 52-week high on Monday, getting a boost from Loop Capital Markets analyst Yun Kim, who upped his rating on the cloud-based enterprise software company by two notches to Buy from Sell, setting a new price target of $320, up from $180.

Workday (ticker: WDAY) is a leader in the “human capital management” (or HCM) software market, a sector targeted at running HR functions. Kim writes that his newly bullish stance reflects “industry checks that indicate a significant increase in large HCM replacement opportunities, especially in North America.”

Kim adds that his previous Sell rating was based on industry checks before the pandemic that found that large HCM deals were slowing. “Given that Workday remains heavily dependent on such large HCM deals to drive growth, we were wary of multiple compression if its revenue growth slows to a level well below 20%,” Kim writes. But he adds that “recent industry checks this past week…point to a surprising turnaround in its large HCM deal activity, especially in the U.S.”

Kim reports that discussions with large global systems integrators indicate a “sudden spike” in requests for proposals, causing the integrators to accelerate their investment in their Workday-related practices. He also thinks that “large HCM replacement opportunities could emerge in the second half as large European conglomerates begin to adopt Workday as their enterprise standard as part of their overall efforts to accelerate their cloud migration.”

He adds that many large organizations are re-evaluating their legacy HCM systems as a result of Covid-triggered workforce changes “that fundamentally reshaped the HR team’s roles in both everyday routines and strategic objectives.” He notes, for instance, that recent corporate initiatives to promote diversity and gender equality have “served as a key catalyst for large organizations to evaluate Workday’s unique offerings in this regard.”

Workday stock is up 2.6%, to $270.78. Shares are up about 13% for the year to date, after a gain of about 45% in 2020.

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