Shares of Workday (WDAY) are sliding in early trading, giving back some of yesterday's gains, as analysts weigh in on the announcement that Wal-Mart (WMT) has purchased a subscription to the company's Human Capital Management, Recruiting, Learning and Planning product. While Macquarie analyst Sarah Hindlian called Workday's contract with the retailer a "significant win," she cautioned against sizing the deal.

CONTRACT SIZE: In a research note to investors, Macquarie' Hindlian said Wal-Mart marks a "significant win" for Workday in its core Human Capital Management, or HCM, business. However, while the retailer would represent Workday's biggest HCM customer by headcount, the analyst noted that a big portion of the retailer's employees are part-time, which Workday prices differently. Part-time employees and associates should be priced at between 12.5%-25% the cost of full-time employees, she added. Therefore, Hindlian cautioned against attempting to size this contract in the $30M-$60M range in upside to billings in the fourth quarter of 2017 and in 2018, as the price of part-time and full-time employees is highly variable, the ramp and implementation times are lengthy, and invoicing is unlikely to be annual at this size. The analyst pointed out that there is no change to her view that pricing in the Human Capital Management market is under pressure, competition is rising, and renewal business as it ramps may begin to see some subsequent headwinds. She reiterated an Underperform rating and a $56 price target on Workday's shares.

INCREASING UNCERTAINTY: Brean Capital analyst Yun Kim also remains bearish on Workday despite the contract announcement with Wal-Mart. While the analyst acknowledged that the announcement signals perhaps a rebound in the company's core HCM business, he noted that this business has shown "increasing variability" over the past two years, with 2016 representing "meaningful deceleration" and its most recent fourth quarter guidance reflecting "greater uncertainty." Further, Kim told investors in a research note of his own that he believes that this represents a sizable and incremental growth opportunity, but could also provide disruption if not managed properly, as sales could become less focused on landing new accounts. Wal-Mart has an employee base of over two million, he noted, but the actual total for the deal could be "more limited and/or heavily discounted," especially given the retailer's recent practice of providing flexible contract terms. Kim reiterated a Sell rating and $62 price target on Workday shares.

PRICE ACTION: In morning trading, shares of Workday have dropped about 3.5% to $78.88. The stock ended yesterday's trading day up nearly 10% after the Wal-Mart pact came to light.