On Wednesday, Goldman Sachs (NYSE:GS) reaffirmed its Buy rating on Workiva (NYSE:WK) stock, a cloud-based software company listed on the New York Stock Exchange under the ticker NYSE:WK, with a steady price target of $115.00.
The firm's endorsement stems from Workiva's strategic pivot in its market approach and sustained investment in its Sustainability solution, anticipating the company's growth in light of the upcoming Corporate Sustainability Reporting Directive (CSRD) in the European Union, set to begin in 2025, and potential similar regulations in the United States.
Goldman Sachs highlights Workiva's readiness to capitalize on the imminent market opportunity due to these regulatory changes. The company's focus on multi-solution deals and Average Contract Value (ACV) increase reinforces the belief in its revenue growth potential.
Goldman Sachs projects an accelerated Compound Annual Growth Rate (CAGR) for Workiva's revenue at 18.7% for the period from 2024 to 2026, which surpasses the consensus estimate of 16.0%.
The investment firm does note that Workiva's long-term success hinges on balancing its elevated Sales & Marketing (S&M) expenditure, projected to remain at 41% of its revenue through 2027, with a reacceleration of growth.
This balance is crucial for the company's stock performance, especially as the operating margin targets of 16% by 2027 and 24% by 2030 are considered modest for a business expected to achieve high growth with over 80% gross margins when operating at scale.
Goldman Sachs' positive outlook for Workiva also includes the potential for the company to expand its business in the EMEA (Europe, Middle East, and Africa) region faster than its overall business growth. The firm believes that Workiva's comprehensive platform and product suite position it well to leverage the multi-year Environmental, Social, and Governance (ESG) opportunity.
In conclusion, Goldman Sachs maintains its Buy rating on Workiva with a 12-month price target of $115, expressing confidence in the company's strategic direction and its ability to incrementally let revenue flow to the bottom line over time.
In other recent news, Workiva Inc . reported substantial growth in its second-quarter results, with an 18% increase in subscription revenue and a 15% rise in total revenue. The company emphasized the growing demand for its Environmental, Social, and Governance (ESG) reporting solutions and launched Workiva Carbon, a product designed to assist with carbon accounting and emissions disclosure. Additionally, Workiva announced the acquisition of Sustain.Life, further enhancing its ESG capabilities.
Workiva also revealed significant deals with major companies in Europe and North America, contributing to an improved operating profit of $3.6 million. The company has updated its financial model, setting a medium-term target for 2027 and a longer-term target for 2030, and has authorized a $100 million share repurchase program.
Despite a decrease in cash and cash equivalents by $97 million due to the Sustain.Life acquisition, Workiva remains optimistic about its future performance. The company aims to exceed $1 billion in revenue by 2027 and more than double that by 2030. To capitalize on the increasing demand for their ESG platform, Workiva is investing in sales and marketing initiatives. These recent developments highlight Workiva's commitment to growth and its focus on ESG reporting solutions.
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