“The stage is set for accelerating growth” amid “robust” demand and improving employment numbers, he wrote in a commentary cited by Bloomberg.
HR-software vendors indicate “the macro environment, along with underlining demand for modern, cloud-based [human capital management] systems continues to improve,” Reback said.
He raised his share-price target for Workday to $275 from $227. “Workday is a net share gainer and can sustain mid-to-high teens HCM growth,” Reback said.
Workday shares recently traded little changed at $220.42. They have soared 35% year to date. The S&P 500 has gained 4% so far this year.
Reback lifted his share-price target for Paycom $365 from $250. The company’s valuation is attractive, and profit margin should resume widening in 2021, he said.
Paycom recently traded at $331.93, up 3.6%. The shares have jumped 25% year to date.
Morningstar analyst Julie Bhusal Sharma likes Workday, though she thinks it’s overvalued.
“We’ve upgraded Workday’s moat rating to wide from narrow, as the company’s consistently high gross retention rates and ability to achieve returns on invested capital confirm our belief that Workday’s software is incredibly sticky, even without adoption of Workday’s latest offerings,” she wrote in an August commentary.
“Both the strong [second] quarter and our wide-moat upgrade have us more confident in Workday’s long-term potential, leading us to raise our fair-value estimate for Workday to $198 from $183 per share.”