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.
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.
.
Minor point but FWIW unemployment rate is sort of relevant for WDAY given the pricing is based on headcount
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.
STOP SAYING "VIKING" LIKES THE STOCK. It's a multi-manager -- there are pods that can be long or short. 13F is useless for MM positioning.
If you want to research a stock, focus on the idio. What does Workday do and who are they winning share from? Will that trend continue? How does that roll up into existing estimates for the stock (ntm, ntm+1, etc.).
I spent about 2 seconds googling "wday ir" and found their fq1 25 investor deck Investor Presentation (workday.com) In there they cite a $142bn TAM, 65m+ users, 60% penetration into Fortune 500, and are guiding for a 15-16% yoy sales growth for FY25 which reiterates what they said in Q4 24 (for their first FY25 guide). FQ1 25 beat their guide.
Another thing -- in Q4 FY23 they cited a TAM of $125bn, the $142-125bn delta is driven by a revision higher to their FINS+ TAM estimate. WDAY is transitioning from being a pureplay HCM by expanding into ERP and FP&A workflows.
This is the fundamental backdrop-- haven't looked at estimates, sell side views, or valuation. But it's more helpful than whatever else has been posted about the stock so far.
TL;dr -- People are pissed because you are writing a lot without doing any real research.
Once again, OP posted with the assumption that Viking liked it. I was extrapolating from that statement. Second note, please refer to my initial comment. I just mentioned whatever I remember from the time I used to follow the stock, which I decided wasn't for me given the dilution despite massive buybacks. I also mention the common catalyst cited i.e. a lot of white space, TAM. I also said that they are not easy to replace and the stickiness of it gives it a moat. I did not cite the numbers because I didn't think there was a need to? If OP wanted the numbers they would have looked the IR report themselves? The reason for starting a thread here is -
a. OP thought the business was generic and replaceable.
b. Why Viking liked it. (Do they or don't is irrelevant)
I think I answered the first question and clearly said that the business had it's ups and downs and is not generic. The second I tried to speculate using data that was available to me, nothing more nothing less. Since I don't know the thought process of Viking's analyst, assuming they like it, I can only speculate what is going on with the data I had at hand which was their sells and buys from the 13Fs. As for the validity of this method, sure you can raise questions. It was discussed on this very forum that Viking was neither a traditional SM nor a traditional MM, I applied whatever yardstick I saw fit.
Given that Viking run like a pod, why dont ppl just join real pods as opposed to Viking
Buddy this does not need to become a MM vs SM debate lmao.
This is a great unintentional troll post
Well, they are leaving. Can count at least 5 friends (if you don’t believe me you can either search on LinkedIn or some of them don’t have LinkedIn / haven’t updated etc) that have left there for good teams at the pods, and are having a much better experience/comp uplift so far.
It’s a fund I have great insight into and am consistently surprised with the pedestal people put it on (in addition to similar tiger cubs). There are exceptions but I really encourage everyone to do their own homework and really scrutinize your definition of what makes a good fund (process/level of work, culture, comp, and CIO/PM - Analyst relationship are my 4 areas).
Also, having been in the industry for a bit, another data point is my perception of the fund has gotten worse every year, perhaps related to those at the top and some of their better analysts leaving.
I get inbound from PE associates looking to switch to HFs and younger HF analysts looking for career advice, and it does seem like the typical profiles you see at SMs (e.g. 2+2 at mega-fund) are increasingly interested and signing offers from pods. It seems to be a combo of path to PM/being a senior risk taker, better training-ground and mentorship, and a more asymmetric comp/promotion path. Again there are some SMs most haven’t heard of that are awesome seats, but I’m speaking broadly here. Just my $0.02.
Chill out guys... and try not to make it a SM v MM thread.
Edit: already turned into it.
Top 5 dumbest posts on WSO. Please don’t post questions about specific stocks, this isn’t a stock picking forum. 90% of the ppl on this post have no idea what they are talking about. Let’s keep WSO for what it’s helpful for.
How would we know what the forum is useful for without knowing what it's not useful for?
I will say this forum does have decent discussions re: process, and has been helpful for trying to learn the methods and analytical frameworks. I've certainly used it a lot to ask questions about different styles and best practices, all of which is helpful for someone trying to break in and grow as an investor. I don't think its an appropriate place to do specific stock analysis though.
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