After trading tightly for several weeks in the wake of a massive gap-up, Workday pulled back Tuesday along with the rest of the market. But a buy point of 279.83 is still valid, according to IBD MarketSmith, which is why WDAY stock is today's selection for IBD 50 Growth Stocks To Watch.
Shares gapped up 11% and broke out from a cup base after third-quarter results on Nov. 29. WDAY stock volume was hefty and rose more than 400% above its daily average.
That showed fund managers were driving much of the action. After the strong gap-up, Workday embarked on a four-weeks-tight pattern, a good sign that shows the stock has been able to hold its gains. For growth leaders, recent tight trades can give rise to a big move soon.
The flurry of positive signs is particularly welcome since the stock got a good shakeout in late September and fell below its 50-day moving average within a cup base. Sellers responded to mixed reviews of the company's annual customer conference, Workday Rising.
Wall Street also was not impressed when the company reported fiscal second-quarter results in August. Shares fell on Aug. 28 but managed to keep a rally going before forming a base. In total, the stock gained 63% in 2023, compared with the S&P 500's 23% rise.
WDAY Stock Holds Strong Technical Ratings
WDAY stock has a best-possible Composite Rating and EPS Rating of 99. The Relative Strength Rating is also strong at 91.
Looking at Workday's quarterly results, sales growth has been steady, even if slower, in recent quarters. On the earnings front, the company reversed to growth in the fiscal fourth quarter that ended in last January after declines before.
For the third quarter of fiscal 2024 that ended in October, earnings of $1.53 a share increased 55% from the prior-year quarter.
Sales rose 17% in the third quarter to $1.87 billion. Most of Workday's sales came from subscription revenue, which increased to $1.69 billion. The company also said that subscription backlog gained 30% from the prior year and also raised its fiscal 2024 subscription revenue outlook to $6.6 billion.
Further, during the third period, the company achieved a key milestone as its Human Capital Management platform boasted a customer base of more than 5,000.
Top Ranking In Industry Group
WDAY stock ranks first in IBD's Computer Software-Enterprise industry group. That group ranks 40th among 197 industry groups IBD follows.
The company offers a cloud platform for payroll and other processes for human resources and related business activities across 175 countries.
Support from fund managers is strong and more funds have been buying WDAY stock over the past four quarters, giving the stock an Accumulation/Distribution Rating of B.
Mutual funds own 51% of outstanding shares. The Janus Henderson Forty Fund and the Franklin Growth Fund hold stakes in Workday shares.
Exchange traded funds are investors as well. The iShares Expanded Tech Software Sector ETF and the iShares Russell 1000 Growth ETF hold shares of WDAY stock.
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