On Thursday, Baird has adjusted its outlook on Workiva (NYSE:WK), a leading cloud platform for regulatory and business reporting. The firm's analyst has lowered the price target on the company's shares to $94 from the previous $105, while maintaining an Outperform rating. The revision reflects Workiva's recent performance, which has seen its stock decline by 13% this quarter, a notable underperformance compared to the IGV index's 1% drop.
The analyst attributes the underperformance largely to market concerns regarding Workiva's ability to meet its long-term financial targets. There has been particular skepticism about the company's margin goals, which are ambitious, aiming to increase from 4% in 2024 to 22% by 2027. Despite these concerns, the analyst regards the margin guidance for 2024 as pivotal and does not anticipate any adjustments to the long-term targets during the upcoming second-quarter earnings call. Instead, the next significant update is expected to be at Workiva's investor day in September.
The reassessment of Workiva's price target comes amid a challenging quarter for the company, which has not only lagged behind the broader market but also its sector peers. The firm's analysis suggests that while skepticism remains over Workiva's margin expansion plan, the current valuation of approximately 5.1 times next twelve months (NTM) sales is below that of the group average, indicating a potentially favorable risk/reward scenario for investors.
Baird's maintained Outperform rating implies that the firm still sees Workiva as a favorable investment despite the recent downturn and target price adjustment. The analyst's comments suggest that the current valuation could present an opportunity for investors, given the potential for reward should the company successfully navigate its long-term financial path.
In other recent news, Workiva has made significant strides in their recent developments. The company announced the acquisition of Sustain.Life, a software firm specializing in carbon emissions management. The $100 million deal is expected to enhance Workiva's new offering, Workiva Carbon, with added features in Carbon Accounting, Carbon Management, and Decarbonization. Stifel maintained a 'Hold' rating on Workiva post-acquisition, citing a cautious outlook on the company's near-term growth prospects despite the strategic move.
Workiva also reported a robust growth in its Q1 2024 earnings, with subscription revenue climbing by 20% and total revenue by 17%. The company forecasts Q2 revenue to be between $174 million and $176 million, and full-year revenue to range from $719 million to $723 million.
Wolfe Research adjusted its price target for Workiva to $100 from a previous $110, maintaining an 'Outperform' rating on the company's shares. The firm cites Workiva's strong customer base, limited competition, and expanding total addressable market as supporting factors.
InvestingPro Insights
As Baird reassesses Workiva's potential amidst a challenging market, insights from InvestingPro provide additional context for investors considering the company's stock. Workiva's impressive gross profit margins, which stand at 76.01% for the last twelve months as of Q1 2023, underscore the company's ability to maintain profitability on its services despite broader market pressures. Additionally, the company's liquid assets exceed its short-term obligations, indicating a strong balance sheet that could weather economic fluctuations.
Even though Workiva has not been profitable over the last twelve months and is trading near its 52-week low, analysts predict the company will turn profitable this year. This forecast aligns with Baird's optimistic outlook and could signal a pivotal moment for investors. The current market capitalization of Workiva is $4.03 billion, with a revenue growth of 17.39% over the last twelve months, further highlighting the company's expanding operations.
For investors seeking more comprehensive analytics and insights, InvestingPro offers additional InvestingPro Tips, including perspectives on Workiva's moderate debt levels and historical return over the last decade. To explore these further, visit https://www.investing.com/pro/WK and take advantage of the exclusive offer with coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With several more InvestingPro Tips available, informed decision-making is within reach.
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