SAN FRANCISCO (MarketWatch) — Shares of Workday Inc. soared Friday as the company’s initial public offering demonstrated yet again the intense investor interest in vendors of cloud-based software applications.
Workday executives ring the opening bell at the NYSE on Friday to celebrate the company’s IPO.
Workday WDAY+73.89% shares traded up 74% to close at $48.69 after pricing at $28 a share, above its range of $24-$26. The stock opened trading at $48.05.
The IPO was drawing so much attention the Pleasanton, Calif.-based company early this week raised its proposed range from $21-$24. Workday offers Web-based applications used by businesses to manage employee records and processes.
The company is seen as a rising player in two key trends in the business software applications market. Cloud computing allows business customers to access computing capacity on a network, instead of setting up expensive in-house data centers.
Workday’s business model is based on the concept of software-as-a-service, in which businesses pay for computing capacity based on need, helping them avoid hefty licensing and maintenance contracts.
“Workday’s big jump is not entirely surprising, given the relative discount to recent cloud IPOs implied by the proposed offering and our view that Workday is best-in-class with a superior growth opportunity,” Morningstar analyst James Krapfel told MarketWatch.
Though, he added that at $48, Workday’s stock “is priced for near perfection.”
Workday is still unprofitable, but its revenue has been growing steadily. For the six-month period ended July 31, the company posted a loss of $47 million, compared with loss of $36 million in the year-earlier period. But its revenue more than doubled to $119.5 million in that same period.
The company was co-founded by Dave Duffield, who also started enterprise software vendor PeopleSoft, which later was bought by Oracle ORCL+0.91% after a hostile takeover battle. Several other PeopleSoft alums are in Workday’s executive ranks. Read: Workday IPO marks return of Dave Duffield
Polya Lesova of MarketWatch discusses what investors can expect from the week ahead as some of America's biggest companies report earnings.
Cloud computing has emerged as one of the hot trends in the IPO market this year, offsetting some of the negative sentiment surrounding social media debuts highlighted by the controversial launch of Facebook Inc. FB-1.17%
Three other cloud-based software companies had successful IPOs in the last six months. Shares of SplunkSPLK-0.67% , a business-data analytics company, have jumped more than 80% since its April IPO. ServiceNowNOW-3.42% , which offers business automation services, has seen its stock roughly double since going public in June.
Palo Alto Networks PANW+3.28% has seen its stock gain nearly 50% since its trading debut in July.
Workday’s strong debut also seemed to help the shares of other cloud-software vendors, including rival Oracle, which was up 1% on Friday, closing at $31, and SAPSAP+1.60% , which was up 1.6%, closing at $70.54. Citrix CTXS+0.12% was up more than 2% earlier before closing with a fractional gain at $67.70.