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Monday, Citi analysts, led by Steven Enders, reaffirmed their Buy rating on Workiva (NYSE:WK) shares with a consistent price target of $128.00. According to InvestingPro data, this target represents significant upside potential, with the stock currently trading at $97 after a recent 13% pullback over the past week. The strong analyst consensus aligns with Citi's bullish stance. The endorsement comes despite recent market concerns surrounding European Union (EU) environmental, social, and governance (ESG) initiatives, which have led to a pullback in Workiva's stock. Citi's analysis suggests that the changing EU ESG policies are likely to affect the small and medium-sized business (SMB) segment, which is not Workiva's primary focus. Instead, Workiva concentrates on larger mid-market and enterprise clients, maintaining impressive gross profit margins of 76.7% and showing solid revenue growth of 16.2% over the last twelve months.
Enders pointed out that despite some hesitation in long-term ESG discussions, partners have indicated a strong close in the fourth quarter, with continued momentum in the pipeline. The near-term (NT) fundamentals for Workiva are believed to remain solid, with the potential for additional gains from a resurgence in capital markets activity, which could lead to accelerated growth in 2025. InvestingPro subscribers can access 12 additional key tips about Workiva's financial health and growth prospects, along with comprehensive valuation analysis in the Pro Research Report.
There is some investor trepidation regarding how Workiva will project its 2025 outlook in light of the uncertainties in the EU. However, Citi does not anticipate that Workiva will adopt a more conservative stance, as this would likely not be well-received by the investment community. The expectation is that ESG momentum will persist, diminishing the perceived risk.
Citi has placed Workiva on a positive Catalyst Watch leading into the earnings report. This suggests that upcoming clarity on EU ESG regulations, expected in the following months, could alleviate investor concerns and potentially boost the stock's performance.
In other recent news, Workiva has been the focus of several significant developments. Amid potential changes to the European Union's Corporate Sustainability Reporting Directive (CSRD), analysts from BMO Capital Markets, Wolfe Research, Raymond (NSE:RYMD) James, Stifel, and Baird have maintained their confidence in the company's growth potential. Workiva has reported robust revenue growth of 16.18%, supported by a strong gross profit margin of 76.72%.
The CSRD, seen as a growth driver for Workiva, could face amendments that may affect the company's expansion in Europe. However, analysts suggest that these changes are unlikely to significantly impact Workiva's business due to its focus on larger enterprises.
Workiva also received upgrades from several financial firms. Raymond James analyst Brian Peterson raised the rating from Market Perform to Outperform, while Stifel upgraded Workiva from Hold to Buy, and Baird maintained an Outperform rating, increasing the price target to $130.
These recent developments are shaping Workiva's current standing in the market, with the company's market capitalization reaching $5.7 billion. The company's strategic focus on the sustainability reporting sector in Europe, despite potential CSRD changes, is considered a major opportunity.
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