Today’s Research Reports on Stocks to Watch: WageWorks and Pivotal Software

Shares of WageWorks and Pivotal Software were both deep in the red on Thursday. WageWorks saw a drop after company confirmed that it has set up a special committee to examine claim that the company withheld info from auditors and Pivotal Software sank on a billings miss for the second quarter.

RDI Initiates Coverage on:

WageWorks, Inc.

Pivotal Software, Inc.

WageWorks, Inc. shares closed down 16.60% on nearly 3 million shares traded yesterday. Trading volume was staggering compared to the stock’s average trading volume of just around 325,000 shares. Traders were less than enthused with the company after learning that the company’s board told the SEC that it formed a special committee to investigate accusations by its auditor, KPMG, that the company withheld information from auditors in 2016 and 2017. CEO Edgar Montes said, "I would like to thank the WageWorks teams for their unwavering focus on engaging new and existing employers and partners and delivering exceptional customer support. We are working diligently to complete the 2016 and 2017 audit and report our results as quickly as possible." JMP Securities analyst David Scharf also lowered his rating on the stock from "market outperform" to "market perform." The Analyst said in a note the following concerns as a reason for his downgrade –departure of Executive Chairman Joe Jackson; impact of potential restatements on historical financial results; and the most concerning issue was the guidance for 2018 revenue and EBITDA. Wageworks’ top-line growth guidance of just 1-4% is short of the 7% that he was expecting.

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Pivotal Software, Inc. shares closed down a little over 20% on Thursday with nearly 18 million shares traded. The company sank as much as 27% in pre-market trading after it delivered financial results late Wednesday. The cloud-software company reported second quarter results that beat expectations and also issued guidance that was better than estimates too. So why the drop? The company missed on billings. "With the stock off in after hours trading, the concern was squarely focused on the $25 million billings miss and if there was a substantive change in demand for Pivotal’s subscription business (59% of revenue) after such a strong beat in F1Q19 ($74 million upside)," remarked KeyBanc Capital Markets analyst Alex Kurtz. "Other key metrics such as $790 million in RPO (remaining performance obligation, a combination of backlog and deferred revenue) and net expansion rate of 150% suggest overall demand appears intact and management outlined the billings weakness as a function of quarter-to-quarter deal lumpiness (Pivotal doesn’t guide to billings)," he added. The analyst has a $27 price target on the stock. For the second quarter, Pivotal Software reported a second-quarter loss of $35.6 million, or 14 cents a share, compared with a loss of $35.4 million, or 52 cents a share, in the year-ago period. The adjusted loss was 6 cents a share. Revenue at $164.4 million was a jump compared to the $126 million in the year-ago period. Analysts were waiting for a loss of 9 cents a share on revenue of $158.1 million. For the third quarter, the company has projected a loss of 9 cents to 8 cents and revenue of $163 million to $165 million. Analysts were waiting for a loss of 9 cents a share on revenue of $162.9 million.

Access RDI’s Pivotal Software, Inc. Research Report at:

Our Actionable Research on WageWorks, Inc. (NYSE: WAGE) and Pivotal Software, Inc. (NYSE: PVTL) can be downloaded free of charge at Research Driven Investing.

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