What Happened?
Shares of finance and HR software company Workday (NASDAQ:WDAY) jumped 9.2% in the morning session after the S&P Dow Jones Indices announced that Workday would join the S&P 500 Index before the start of trading on Monday, December 23, 2024. The S&P 500 is a widely followed index that tracks the performance of the 500 largest companies in the United States. Being included in the Index means that Workday will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock.
We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
Is now the time to buy Workday? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Workday’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 12 days ago when the stock dropped 12.4% on the news that the company reported underwhelming third-quarter results. Its billings missed, as the company observed continued deal scrutiny in EMEA. Also, key deals slipped in the quarter, affecting revenue recognition.
Regarding its AI potential, management's comment suggests it is still early days. This may have unsettled some investors who were hoping for more optimistic updates, especially in light of stronger results reported by some SaaS peers. Guidance also fell slightly short, with Q4 subscription revenue and non-GAAP operating margin missing by a bit. Overall, this quarter was weak, leaving room for improvement.
Workday is up 4.9% since the beginning of the year, and at $281.37 per share, it is trading close to its 52-week high of $307.21 from February 2024. Investors who bought $1,000 worth of Workday’s shares 5 years ago would now be looking at an investment worth $1,720.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
