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ERROR: type should be string, got "https://www.barrons.com/articles/sell-cloud-stocks-salesforce-com-and-workday-analyst-says-51588688149\nSell Cloud Stocks Salesforce.com and Workday, Analyst Says\nEric J. Savitz\nMay 5, 2020 10:15 am ET\nCourtesy Workday\nNo question about it—cloud computing is having a moment. Without easy access to cloud-based email, videoconferencing, word processing, sales tools, and publishing software, the current economic downturn would be worse. Maybe a lot worse. The leading players in the public cloud— Amazon. com, Microsoft, and Alphabet’s Google—all reported earnings last week, and all posted huge growth in the March quarter.\nThe real pioneers in cloud-based computing were enterprise computing companies like Salesforce.com (ticker: CRM) and Workday (WDAY). Salesforce opened for business in 1999, seven years before Amazon (AMZN) launched Amazon Web Services. Workday’s launch came in 2005, predating AWS by a year.\nSalesforce has come to dominate the market for cloud-based customer-relationship management software. Workday leads the market for cloud-based human-capital-management software, used to manage HR departments, and has jumped into the market for the financial software tools known as enterprise resource planning, or ERP.\nAnd here’s something they have in common: Late Monday, Rosenblatt Securities analyst Yun Kim launched coverage of the two companies with Sell ratings.\nFor Salesforce, which closed Monday at $161.47, his target price is $120. For Workday, which ended Monday at $148.47, his target is $110.\nKim has a similar view on each stock: He sees the potential for slower-than-consensus revenue growth ahead, which he fears could trigger multiple compression in both cases.\nBarron's Tech\nA weekly guide to our best stories on technology, disruption, and the people and stocks in the middle of it all.\nSalesforce, he writes in a research note, “currently enjoys a de facto enterprise standard status in the enterprise business application market.” That’s helped drive its 20%-plus annual revenue growth rate—impressive performance for a company that has been public since 2004. But Kim finds that “large scale business application deployment is becoming a lower priority among large organizations,” and predicts that “large deal activity [will] slow even after the IT spending rebounds.”\nHe thinks the company’s ability to churn out 20% growth year after year—and its target of $35 billion in revenue by fiscal year 2024—are in doubt. And if that happens, Salesforce shares will be hit with multiple compression.\n“Our industry checks prior to Covid-19 in late January indicated that the pace of large-scale business application deployment, including Salesforce-driven initiatives, was likely to slow meaningfully this year,” he adds. “Hence, we believe that when the enterprise IT spending environment returns, the pace of large-scale business application deployments is likely to lag other initiatives with higher priority. Our most recent checks indicate that many of these Salesforce initiatives have been pushed out indefinitely or have been downsized significantly.”\nKim also thinks the recent departure of co-CEO Keith Block could trigger the departure of key sales executives, which “could impact its large deal execution.”\nAs for Workday, Kim says the company has “become one of the premier” software-as-a-service providers, but that its medium-term growth “is dependent on the successful execution of multiple growth vectors while sustaining its core HCM [human capital management] business, which remains 80% of its subscription business.” In other words, it will not be easy for the company to drive growth of its newer financial software while it maintains the historic growth of its HR software.\nKim says his checks find that “large-scale HCM deployment is becoming a lower priority among large organizations,” and that Workday’s growth could lag the industry when IT spending resumes. He notes that Workday trades at eight times calendar 2020 estimated revenue on 19% growth, “which is towards the lower end” of the valuation of large-cap cloud-based software stocks. But as with Salesforce, he sees risk of further multiple compression if the growth rate falls well below 20%.\nKim notes that Workday’s subscription revenue growth rate has fallen over the past two years from 36% in 2018 to 29% in 2020, with billings growth headed in the same direction, reflecting “an overall slowdown” in its core human-capital-management software business “as the law of large numbers starts to catch up,” with the market reaching a saturation point.\nEchoing his view on Salesforce, Kim writes that “industry checks prior to Covid-19 in late January indicated that the pace of large-scale business deployment, including large HCM initiatives, was likely to slow meaningfully this year, reflecting that they have become a lower priority vs. previous years.” Kim adds that he is “wary of the overall sustainability of its core HCM market in the medium-term,” which he believes will grow at a much slower rate compared with the company’s and investors’ expectations in the high teens when IT spending rebounds.\nWorkday shares were up 2.5%, at $152.23, in recent trading, while Salesforce was up 0.9%, at $162.87. The S&P 500 was up 1.4%.\nWrite to Eric J. Savitz at eric.savitz@barrons.com\nNo question about it—cloud computing is having a moment."