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Citi reaffirms Buy rating on Workiva stock amid strong ESG bookings and robust margins

EditorEmilio Ghigini
Published 03/05/2024, 07:28 pm
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On Friday, Citi maintained its Buy rating on Workiva (NYSE:WK) stock, a leading cloud-based software provider, while increasing the price target to $103 from the previous $95.

The adjustment comes after Workiva reported its first-quarter 2024 results, which revealed a performance that exceeded some concerns, particularly in core Integrated Services metrics.

Despite an $8 million shortfall in billings attributed to a continued dip in software demand, the company posted a $1.5 million subscriber beat. This success translated into a $1 million revenue increase for the full calendar year 2024 and a significant $10 million boost in projected EBIT, surpassing the initial $1 million beat.

The company's ESG product remains a consistent top performer in bookings for the seventh consecutive quarter. This strength is helping to balance some of the weaknesses observed in the core Financials segment.

Citi's analyst highlighted the potential for increased adoption of Workiva's ESG offerings as new regulations like the Corporate Sustainability Reporting Directive (CSRD) are set to commence in calendar year 2025, which will affect reports for calendar year 2024.

Citi's positive outlook is further reinforced by Workiva's ability to find efficiencies that more than compensate for its ongoing investments, leading to a robust margin upside.

The firm's optimistic stance on the demand landscape and the significant margin improvement are key factors in the decision to raise the price target and reiterate the Buy rating for Workiva shares.

Workiva's recent financial performance and strategic positioning suggest the company is navigating the softer software demand effectively. With regulatory changes on the horizon that could spur further adoption of its products, Workiva is poised to remain a preferred choice for investors, as reflected in Citi's updated valuation and sustained endorsement of the stock.

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InvestingPro Insights

As Workiva (NYSE:WK) garners a Buy rating and an increased price target from Citi, real-time data and InvestingPro Tips offer additional perspectives on the company's financial health and market performance. With a market capitalization of $4.38 billion and a notable revenue growth of 17.13% over the last twelve months as of Q1 2024, Workiva shows signs of expanding its financial scope despite not being profitable over the same period. The company's gross profit margin impressively stands at 75.52%, indicating a strong ability to control costs relative to revenue.

InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, reflecting optimism about Workiva's future performance. This aligns with Citi's positive outlook, especially as Workiva's liquid assets exceed short-term obligations, suggesting financial stability. Additionally, while the company is trading near its 52-week low, analysts predict Workiva will become profitable this year, presenting a potential upside for investors.

For those considering an investment in Workiva, there are 8 more InvestingPro Tips available, which can be explored further for a comprehensive analysis. To enhance your investing strategy with these insights, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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