Workday Plunges Most Since 2012 as Oracle Competition Grows

Workday Inc., the cloud-based software provider facing competition from Oracle Corp., dropped the most since the company went public in October 2012 after forecasting a slowdown in billings growth.

Billings expansion decelerated to 30 percent in the fiscal first quarter, after growing 72 percent on a year-over-year basis last quarter. The company said the billing measure will increase 35 percent for the full year, compared with a 69 percent rise in the latest fiscal year.

Workday fell 11 percent to $82 at 4 p.m. in New York, for the fourth-biggest decline in the Russell 3000 Index. The stock had advanced 13 percent this year through yesterday.

The Pleasanton, California-based company, along with other firms in the cloud-based human resources sector, are having to stave off an increased presence in the market by larger enterprise-software companies like Oracle, Derrick Wood, an analyst at Susquehanna International Group, wrote in a client note Wednesday.

Oracle founder Larry Ellison said in a March 17 earnings call that his company intends to be the biggest provider of server-based enterprise resource planning systems.

“We are on our way to building the largest ERP business in the cloud,” he said.

Stretched Stock

After rallying since March, Workday’s stock price may also be overextended, according to Katherine Egbert, an analyst at Jefferies & Co.

“Investors are likely to focus on the deceleration in the key billings growth metric,” Egbert wrote in a note to clients. “At the current valuation, most potential upside seems already priced into the stock.”

Workday was downgraded to hold from buy on Wednesday by Cross Research, while Piper Jaffray and Susquehanna International Group lowered their respective price targets on the stock.

There will be “a bit of a cap on the shares” until Workday is able to translate new clients into “sustained billings acceleration,” Kirk Materne, an analyst at Evercore Partners in New York, wrote in a client note.