Workday rises as RBC Capital starts with outperform rating
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Workday (NASDAQ:WDAY) shares rose around 1% in early trading on Wednesday as investment firm RBC Capital Markets initiated coverage on the back office software provider with an outperform rating.
Analyst Rishi Jaluria started Workday (WDAY) shares with an outperform rating and per-share price target of $275, noting there is a "long runway" for 20% or more subscription growth as the company continues to displace "legacy solutions," along with a big expansion opportunity as the company evolves.
"Our checks indicate that Workday is increasingly landing with HR and financials simultaneously and that planning is gaining meaningful traction against the competition," Jaluria wrote in an investor note, adding the company is primarily replacing Oracle (ORCL) and SAP (SAP) products.
"We expect to see further momentum with spend management as Scout continues to be integrated."
The analyst also said that Workday's (WDAY) M&A playbook is "underappreciated," as it uses deals to complement existing R&D and integrate the acquisitions on its core platform, unlike other companies such as Coupa, Twilio (TWLO) and to some extent, Salesforce (CRM).
Jaluria also said Workday (WDAY) is balancing its long runway of growth with "healthy profitability" as evidenced by its high 20% free cash flow margin, along with attractive unit economics. 
"We see room for future margin expansion to 30%+, driven by a greater mix towards expansions over time and continued solid unit economics," Jaluria wrote.
More on Workday

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Workday: Steady Growth, Profitability Beckons, Very Attractive Price
Workday: Extending Deals Duration A Positive Signal Amidst Competition