The stock market has been dominated by excitement over artificial intelligence (AI) during the past 12 months. Investors have rushed to buy some of the largest technology stocks in the world because they are at the forefront of the AI revolution, backing up the hype with strong financial results.
But great opportunities still exist in other areas of the technology sector. According to The Wall Street Journal, 10 analysts cover innovative cloud data company Workiva (WK 0.86%), and they are overwhelmingly bullish on its prospects.
Workiva just released its 2023 fourth-quarter and full-year financial results, and it continues to see rapid growth among its highest-spending customers. Plus, the company made more progress in capturing one of the most exciting opportunities in its history. Here's why investors might want to follow Wall Street's lead and buy Workiva stock.
Workiva offers critical solutions for modern organizations
Cloud computing is revolutionary. It empowers businesses to operate online, hire remote employees from all over the world, and reach a global customer base. But it comes with challenges, especially for managers tasked with monitoring the work of those remote teams.
Thanks to the cloud, organizations are using dozens or even hundreds of digital applications each day. They might be using Alphabet's Google Cloud to store data, Salesforce to manage customer relationships, and Workday for performance management. That means data is often fragmented and difficult to track, but that's the problem Workiva solves.
Workiva's platform connects to all of those applications and pulls data onto one dashboard, creating a single source of truth for managers. From there, they can easily compile reports for their executive team, or use one of Workiva's ready-made templates to file critical compliance forms with the Securities and Exchange Commission.
Environmental, social, and governance reporting is the next big opportunity
Businesses closely monitor their financial performance, but global governments continue to introduce rules that require them to track their impact on society, too. This is often referred to as ESG (environmental, social, and governance) reporting, and it can include everything from an organization's carbon footprint to the diversity of its workforce.
Workiva used its experience in data aggregation to create a world-class ESG reporting platform. It's a holistic end-to-end solution designed to help companies construct an ESG framework, collect data, and report their findings. In the fourth quarter of 2023, Workiva said its ESG solution was the company's top source of bookings (which typically convert to revenue over time).
An avalanche of new ESG reporting requirements will kick in during 2024 and 2025 across America, Europe, and the Asia-Pacific region, which means Workiva's platform will only grow in importance from here.
Consulting specialist PwC estimates the addressable market for ESG reporting software will be worth over $17 billion across Europe and North America by 2026. Considering Workiva is only a $4.5 billion company, that presents an enormous opportunity for growth.
Workiva continues to attract large customers
Workiva generated a record-high $630 million in revenue during 2023, which was a 17% jump compared to 2022. The company had 6,034 total customers at the end of the year, but the cohorts spending the most money happen to be the fastest growing, which is a sign Workiva's tools are increasingly valuable to larger, more complex organizations.
Image source: Workiva.
As the slide above shows, there was a 32% increase in the number of customers spending $300,000 or more per year, which was the fastest-growing cohort.
Plus, a record-high 64% of Workiva's customers are now using more than one of its products, which shows businesses are likely to increase their spending once they are in the door.
Wall Street is very bullish on Workiva stock
Workiva stock fell after the company reported its results because it issued conservative guidance that points to revenue growth of just 14% in 2024. Management is wary of uncertainty in the broader economic environment, because high interest rates could impact how much businesses spend on software.
Workiva stock is now down 48% from its all-time high, which was set in 2021. Investors assigned a somewhat unrealistic valuation to the company back then, but with more customers and more revenue than ever before, the dip might be an opportunity to buy for the long term.
The Wall Street Journal tracks 10 analysts covering Workiva stock, and seven of them have given it the highest possible buy rating. One is in the overweight (bullish) camp, while two recommend holding. Not a single analyst has a sell rating.
That's a very bullish consensus, and investors might want to buy shares of Workiva with the intention of holding for the next few years while the ESG opportunity blossoms.
