Kevin Moloney/Fortune Brainstorm Tech
CEO Aneel Bhusri saw Workday's price surge nearly 20% on Friday.
- Workday stock surged nearly 20% on Friday following stellar earnings.
- Some of that growth was organic, Wall street analysts said in research notes published Friday. But the real excitement was the result of gains from Adaptive Insights, the planning company it acquired in June for $1.55 billion.
- Q3 2019 was Adaptive Insight's first quarter on the books.
- Now, analysts said, it's time for Workday to keep an eye on Anaplan, Adaptive Insight's biggest competitor.
Workday surged almost 20% on Friday following impressive earnings in its third quarter of fiscal 2019.
Wall Street is attributing much of Workday's earnings success to Adaptive Insights, the business intelligence software company it acquired for $1.55 billion in June. The third quarter was Adaptive Insight's first full quarter on the books.
But to sustain that success, analysts said, Workday needs to keep an eye on Adaptive Insight's competitors - namely, the $3.4 billion Anaplan.
Super growth came from M&A
Workday's total revenues were $743.2 million, up 33.8% from the same time last year. Analysts were looking for just $723 million. Its subscription revenue was also 2% above consensus, while free cashflow was 18% above consensus and billings were 13% ahead of consensus.
Some of that growth was organic, but the cherry on the sundae was Workday's gains from its newly acquired assets.
"If we back out benefits from the Adaptive acquisition, we think results represent stable execution on an easing comp as opposed to a meaningful and sustained inflection in the business," wrote UBS analyst Jennifer Swanson Lowe in a note published Friday.
"We like the company," Swanson Lowe wrote, adding that she considers it overvalued next to companies like Salesforce and ServiceNow.
Read more: Workday, the HR platform, is sending its employees weekly surveys to weed out bad managers and catch bad office behavior
Workday's new threat: Anaplan
Workday historically has focused on human capital management and financial management, whereas Adaptive Insights is used by companies for planning, budgeting and forecasting. Its biggest competitor is the publicly-traded Anaplan.
JMP analyst Pat Walravens wrote Friday that Workday investors should "keep an eye" on Anaplan looking forward.
Still, he added, the two companies have enough differences to keep things calm for the time being.
Though both Anaplan and Adaptive Insights are cloud-based planning services, Walravens emphasized that Anaplan is more focused on large enterprises whereas Adaptive Insights works with small-to-midsized companies. In addition, Anaplan is used more in supply chain management and sales, while Adaptive Insights is used more in HR departments and only just started expanding into corporate sales departments, he wrote.
Walravens said he'll continue to do "due diligence" on the competition, but others on Wall Street think it's possible for both products to thrive.
"Investors in Anaplan periodically will become transfixed over how to react and what to make of comments by Workday about Adaptive," wrote Canaccord analyst Richard Davis. "This is really a two-horse race with more than enough room for both firms to flourish."