Silver Lake‘s talks to acquire Workday Inc. (NASDAQ:WDAY) for up to $43 billion may be the clearest sign yet that private equity sees opportunity in software stocks battered by this year’s artificial intelligence-driven selloff, according to Constellation Research CEO Ray Wang.
“We’re in the SaaSpocalypse”
In an interview with CNBC, Wang said that Workday’s depressed valuation doesn’t reflect its underlying business.
“We’re in the SaaSpocalypse. Pricing is actually undervalued. The PE ratios have come down so hard, but guess what? If you’re in the SaaS business, you’ve got data, you’ve got distribution, you’re still gonna win,” Wang said.
He added that Workday is growing 12% year-over-year, which he said meets the software industry’s standard benchmarks for combining strong growth with strong profitability.
Workday is scheduled to report its second-quarter earnings on Aug. 27.
Echoes of the Dell Turnaround
In 2013, Silver Lake partnered with Dell Technologies Inc. (NYSE:DELL) founder and CEO Michael Dell to take the company private after investors feared it would be left behind by the shift to mobile and cloud computing.
“We all thought Dell was not gonna make it to the hardware revolution, and Dell came out perfectly on top. Workday is in the same situation,” Wang added.
The SaaSpocalypse Backdrop
Before Reuters reported on the deal talks, Workday’s shares had fallen about 15% so far this year and more than 40% below their 2024 high.
The stock is currently 3.88% lower year-to-date.
That decline is part of a broader rout that Wall Street has nicknamed the “SaaSpocalypse,” a selloff in software stocks driven by fears that AI tools capable of automating work once billed on a per-seat basis could erode the traditional SaaS pricing model.
Who Might Be Next
Wang said Workday isn’t the only enterprise software name caught up in “displacement fear” from AI, naming Salesforce Inc. (NYSE:CRM), ServiceNow Inc. (NYSE:NOW), and Adobe Inc. (NASDAQ:ADBE) as similarly exposed.
He also floated a longer-term possibility that Silver Lake could eventually sell a revitalized Workday to a hyperscaler such as Amazon.com Inc.‘s (NASDAQ:AMZN) AWS or Alphabet Inc.‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, and said OpenAI or Anthropic could make a similar play a few years after they go public.
Price Action: Shares of Workday closed 17.78% higher on Thursday at $206.45 and fell 1.34% in pre-market trading on Friday.
Benzinga edge rankings indicate Workday’s stock has a Momentum score in the 88th percentile and a Growth score in the 58th percentile.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Sundry Photography / Shutterstock.com
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