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Why Workday Inc. Stock Gained 24.6% Last Month

By Anders Bylund – Sep 11, 2018 at 2:49PM

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Analysts painted a picture of fantastic second-quarter results. You won't believe what happened in September when the business software specialist delivered its quarterly report.

What happened

Shares of enterprise software expert Workday (WDAY 3.24%) rose 24.6% in August 2018, according to data from S&P Global Market Intelligence. In a relatively quiet month, investors and analysts alike boosted the stock in anticipation of a strong second-quarter report in early September.

So what

At least five analyst firms published bullish reports on Workday last month, citing good-looking industry checks ahead of the second-quarter business update and a solid deal pipeline beyond that event.

The actual report delivered on those promises by beating Wall Street's consensus targets across the board. However, Workday's stock closed 9% lower the next day as management's third-quarter guidance targets failed to impress.

A young smiling woman is sitting in front of a laptop, using a calculator and looking at a piece of paper.

Image source: Getty Images.

Now what

It's not terribly surprising to see Workday's ultra-volatile stock making wild swings around any earnings presentation. It's just how this stock rolls. Even now, on the heels of solid gains in August and a sharp correction in early September, Workday investors are enjoying a market-stomping 33% return in 52 weeks and a 16% three-month gain. And since the stock trades at a hair-raising 93 times forward earnings estimates or 188 times trailing free cash flows, you should expect Workday's wild swings to continue unabated.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Workday. The Motley Fool has a disclosure policy.

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