Greg
Public Equities Commentary
Workday should be valued on price-to-sales now that the market is saying old cost structures don't work, and unless things change it can't be touched at all. That responds to @WagieCapital, who sees much more room to fall at 43x trailing earnings with only 11-12% projected revenue growth, and $1.6B of stock compensation on a $10.6B revenue guide, about 2.25 times diluted EPS. x.comÂ
Workday at 3x sales is a travesty for a business of its quality, implying the market expects management to destroy value through poor capital allocation on top of AI fears. It could likely raise margins toward 30% without much customer impact, given bloat and complacency; the same factors that make it easy to catch up also make it easy to run more profitably. Venture valuations like Rippling's make more sense with Workday at 6-8x sales. x.com x.com x.comÂ
Workday has 61% upside, according to a bot's model. x.comÂ
Workday's Q2 was totally fine, and the business is steadier than the bearish narrative implied. Growth relies on upselling a mature HCM and finance base, giving about 10-12% revenue growth, while margins have plenty of room to rise from 14% GAAP. AI is only 6% of revenue, so the business is unlikely to change much. The real risk is big companies shifting spending to hotter AI tools such as Claude. A sale anywhere below $250 would be insulting to shareholders, and 20x earnings power is not crazy. … Show more
Workday looks undervalued, with multiple valuation models putting intrinsic value near $165, a 15-16% discount, despite fears that AI will disrupt SaaS and weak enterprise software guidance from IBM. Its AI agents run at enterprise scale for over 4,000 clients, its 12-month subscription backlog grew more than 15%, and non-GAAP operating margin widened to 31.8% as management raised full-year profit guidance. x.comÂ
Some software stocks had gotten stupid cheap, including monday.com, Wix, Cellebrite, Adobe, Salesforce and Workday, which makes the sector's rebound welcome. x.com x.comÂ
Salesforce and Workday have another 25% downside, with Adobe already trading at 7x. That holds even against @dalibali2's point that both sit near single-digit free-cash-flow multiples and can keep growing free cash flow by double digits for a long time. x.comÂ
AI is forcing a repricing of the enterprise software business model, and for ServiceNow and SAP the reset is not finished. Claude Managed Agents eased production AI deployment, ServiceNow's AI bundling raised monetization questions, and SAP warned of short-term pain like its cloud-migration margin squeeze. Multiples compress before new economics are understood, and most software still trades at a premium on GAAP P/E and EV/FCF ex-stock comp. Workday at 1.7x revenue hints at a floor. x.comÂ
Software is nowhere near a floor because AI has broken the assumption behind the sector's premium: very long-duration, highly recurring revenue. Competition is intensifying, new products such as Anthropic's suite far outperform incumbents like Microsoft Copilot, and AI natives move faster without legacy constraints. Accounting flatters results, with Snowflake's SBC above its CY25 free cash flow. Even at 30x GAAP earnings most names have downside, versus Alphabet at 23x and Nvidia at 14x. x.com … Show more
Workday's problem is not vibe coding but fundamentals that have deteriorated since 2022. It spends 35% of revenue on R&D yet produces no products or features that drive growth, while spending heavily on acquisitions. @CapitalObserver notes it has nearly 15% short interest despite a forward free cash flow yield above 5%. x.comÂ
Workday's 3.80% 2032 bonds trade below par mainly because their coupon was set in a lower-rate regime, not because of credit worries, so they can work through carry, roll and pull-to-par even without major spread tightening. They trade roughly in line with generic BBB spreads. x.comÂ