why does viking like wday?
the product itself just seems generic and clunky to use with competitive backdrop of other hr tech companies easily making similar offerings at lower price points?
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As an applicant Workday is annoying. That aside, as an investor, the product is solid and they dominated the market niche that they pursue i.e. midmarket top end companies and a ton of SMBs. Something noteworthy and the reason I like it is that the low/negative EPS actually hides strong cash flow, not to mention they are sitting on a lot of cash.
Something you are wrong about OP is them being replaceable which they are not, most ERP & HCM systems are just not worth replacing and are sticky so this is not WDAY specific. What I do hate about the stock is that despite buybacks, they have massive SBC that is diluting shareholders about 5% a year.
The biggest catalyst for the stock is perhaps the fact that they are too US heavy. They have a lot of white space in the international market, so this is essentially a TAM play in hopes that they will capture market share and the SBC will at some point stop dragging the performance.
The stock is by no way cheap, but they are reaching an inflection point after years of no/negative earnings, this could also be an index play because once this thing turns positive EPS, which it already has, the odds of this being added to S&P500 are pretty high.
thanks for the insight! I'm guessing just having hard time believing hcm industry could be a big play/market to go after vs some other sectors/names
In the interim you are right, much better opportunities in the market. This potentially leaves two options why Viking bought it, I'm speculating here so take it with a grain of salt.
1. Index Rebal: We still have Sept & December left for the S&P rebalance, sell side projections show that the company has officially turned EPS positive and have modeled as such for the foreseeable future. So Viking probably thinks this will join the index.
2. Long Term: This could be a better investment for a longer duration as they expand overseas potentially causing a rerate.
Could be both, they have been eyeing WDAY since 2020. Sold out completely in 2021 & 2022, them selling it out towards the end/beginning of the FY is usually indicative of them thinking this will be added to the index. I think they will either sell out of it in 3Q 24 or double down and sell out by 1Q 25 if this is not added.
OP, I was re-examining after taking Research Analyst above's advice, here is some food for thought.
When Viking originally bought this 1Q20, the stock was in the gutter, due to the broader equities taking a hit & unemployment spiking, FRED shows it was 14.8% by April. Viking probably bought this because they knew the valuation doesn't make sense because hiring is going to start again. And so it did, in fact a lot of companies overhired in the consequent quarters. Unemployment more than halved and the stock more than doubled after which they sold out in 1Q21.
Unemployment was still high in 4Q21 and they might have thought that would decline implying among other things growth in revenue, so they bought despite the stock being at all time highs. The stock slid LDD by 1Q22 but unemployment did decrease by >1 bps so they might have thought the thesis was intact which is why they added ~28% to the existing position.
By 2Q22 the stock almost halved because of bad guidance (recurring issue with this stock) and earnings among other things when they probably thought there were better opportunities in the market so sold out completely in 3Q22 when the stock somewhat recovered from damning lows. During this period, unemployment rate did not change much, so they re-entered the again while the stock was still down in 1Q23, unemployment rate has been treading upwards so they probably think this is worth holding which is why they 8x'd that initial position. The management has yet again given shit guidance, they could be sandbagging but we never know. Also have a new CEO now, they probably like him maybe.
Looks like Viking likes WDAY the business, but they too acknowledge there are better opportunities in the interim when it comes to stocks which is probably why they kept selling and re-entering.
Once again, this is pure speculation but this makes more sense than index rebal, and I have also not heard about Viking having any PM who did rebals. Also, if you really are interviewing with Viking, say hi to Julie for me, she is an angel 🙂.
OP, please be careful and take the previous advice with a grain of salt. I can almost guarantee that Viking is not buying a stock for index rebalancing or due to unemployment figures. They are running low net after all.
I don’t have an answer for you since I don’t cover those stocks and know the narratives/key debates of the stock. Predicting why another fund is buying a name can be challenging, especially if you’re not in the know about the sentiment, the data releases that are perceived as valuable, and the catalyst path.
If this is really important to you, my advice would be to try to find sell-side reports and read through the earnings transcripts to see if you can decipher the debate/key drivers of the name. You likely won’t be able to get a feel for buyside expectations or sentiment without being in the game but you might be able to get a feel for the idiosyncratic reasons behind why investors are buying/selling the stock.
+1
I just gave my opinion of wday as a business and why I like it. Why Viking bought it is pure speculation, I have no idea why people think this is advice. Isn't this forum all about speculation, we speculate salaries and carry and what's happening at firms, I just did the same. Don't understand why this rubbed some the wrong way.
.
What’s gone on in this post kinda sucks. Sadly, no one on WSO ever seems to give high quality responses to posts about single stocks and I feel like EscapingAlpha (fire name btw) did a solid job here.
And now everyone is rushing to tell OP not to listen - despite the fact that (a) OP didn’t do/share his own work and (b) OP probably should have known better than to ask here.
I guess what I’m trying to say here is that I’m more impressed with EscapingAlpha than OP, and I don’t think people shitting on EscapingAlpha —with zero counter arguments about WDAY provided— really does anything.
At the same time, good on the above poster telling OP what work he needs to do, and on OP for being receptive.
No, the internet doesnt need another echo chamber of people who dont know shit talking to one another. I drop a lot of truth from a decade on wall street here, because i get bored but also because reading this place back when i was in ug helped me out. It wouldnt have been useful for me if half the posts were from legit people and the other half were from 19 year olds pretending to be legit. And no, his work was not good. It wasnt even “on the desk for a month, still getting the hang of things” level. It was baseless speculation, overextropalating from practically zero data. Dont imitate this style of work, its malarkey.
I'm sorry, I seriously do not understand your animosity towards me. Of course the reason why Viking likes it is pure speculation, do you really expect an analyst from Viking to log on here and tell you what the reason his firm bought the stock is? I didn't even see you attempt, what is wrong with speculation? That's what people do on this site everyday.
My whole reasoning for commenting on this post was because OP said: "the product itself just seems generic and clunky to use with competitive backdrop of other hr tech companies easily making similar offerings at lower price points?"
Which anyone who has done even little digging in the space knows is not the case, which is why the bulk of my first comment pertained to explaining what I liked and did not about WDAY. Why Viking bought it is speculation, at no point did I shut someone down to claim what I wrote as the foolproof reason, every user is free to speculate.
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