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On Thursday, Citi analysts maintained their Buy rating on Workiva (NYSE:WK) with a steady price target of $130.00. Currently trading at $69.91, the stock appears undervalued according to InvestingPro analysis. The firm addressed the recent sharp decline in Workiva's stock value, which has seen a 36% drop year-to-date compared to the 11% decrease in the iShares Expanded Tech-Software Sector ETF (IGV). Citi views the selloff, attributed to concerns over sustainability regulations in the EU, as an overreaction and considers the current stock valuation an attractive entry point for investors.
Workiva's enterprise value to revenue (EV/Rev) ratio stands at 3.8 times, and its enterprise value to free cash flow (EV/FCF) ratio is 24.4 times, which Citi analysts find appealing. The company maintains impressive gross profit margins of 76.7% and achieved revenue growth of 17.2% in the last twelve months. They have analyzed recent Corporate Sustainability Reporting Directive (CSRD) ESG reports and evolving regulations, concluding that the market's reset of Workiva's stock is excessive, even though there may be some near-term risks of deal delays. The analysts believe that the medium-term opportunity for Workiva remains strong.
The near-term headwinds for Workiva are expected to continue until there is further clarity on regulatory matters, with a potential impact of 5 percentage points at most. However, Citi takes comfort in the success of Workiva's platform, noting that ESG reporting represents a relatively minor segment of the company's total addressable market (TAM).
In addition, Citi acknowledges potential uncertainties related to tariffs that could affect deals in the near term but does not perceive this as a unique risk for Workiva. The impact is estimated to be minimal given that Workiva's international exposure is less than 20%. The affirmation of the Buy rating and the price target reflects Citi's confidence in Workiva's position and outlook despite current market challenges. InvestingPro data reveals several positive indicators, including strong liquidity with current ratio of 1.77 and moderate debt levels. For deeper insights into Workiva's financial health and growth prospects, check out the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Workiva has reported significant developments that are of interest to investors. Truist Securities recently reiterated a Buy rating for Workiva, maintaining a $120 price target, following a robust fourth-quarter performance in 2024. The company exceeded expectations with a 22% growth in subscription revenue, driven by new client acquisitions and expanded accounts. Meanwhile, BMO Capital Markets adjusted its price target for Workiva to $108, citing potential impacts from European regulatory changes, although they maintained an Outperform rating. Stifel also revised its price target to $120, emphasizing Workiva's stability in core financial reporting despite ongoing discussions around ESG reporting standards.
Citi analysts have maintained a Buy rating with a $130 price target, suggesting that the market's reaction to EU sustainability regulations has been excessive. They see the current market valuation as an opportunity for investors. Additionally, Workiva announced changes to its Board of Directors, with Brigid Bonner stepping down and Astha Malik nominated for election. These developments reflect Workiva's ongoing strategic adjustments and market positioning amid evolving regulatory landscapes.
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