Workday (WDAY) is a fairly recent entrant into the publicly traded software space, and in its short trading history it has garnered significant investor interest in its growth strategy, shedding light on wider investor appetite in technology growth, says Alex Zukin, Research Analyst at Stephens Inc.
“Tremendous interest. There’s a huge appetite for growth today. You’re seeing companies like Workday that trade at 15, 16, 17 times forward, one-year-out revenues and growing at 40, 50%-plus, and that to me demonstrates that there’s a significant appetite to be involved with growth names,” Zukin said.
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Zukin says software companies aren’t spending much on acquisitions given their high rates of organic growth, but their capital is finding its way into ways to maintain growth rates by hiring sales staff, marketing people and service people.
“Also often forgot about is, these systems still need to be implemented, these systems still need to be supported, and particularly when you’re hiring a tremendous amount of sales people and you’re growing customer after customer after customer, you want to make sure that your customers are happy, because the most important aspect of the SaaS model is customer happiness and retention rates,” Zukin says.
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