Bernstein cuts Workday stock price target to $325, retains Outperform

Published 24/05/2025, 12:14
Bernstein cuts Workday stock price target to $325, retains Outperform

On Friday, Bernstein SocGen Group adjusted its stance on Workday (NASDAQ:WDAY) shares, reducing the price target to $325 from the previous $348, while maintaining an Outperform rating. According to InvestingPro data, the stock has declined 12.83% over the past week, with analysts maintaining targets between $250 and $340. The adjustment follows Workday’s recent earnings report, which, despite meeting expectations on subscription revenue and margins, did not impress Wall Street.

The report from Workday highlighted a quarter that was consistent with forecasts, showing marginal outperformance in subscription revenue and margins. The company, which maintains a healthy 75.66% gross profit margin and 14.95% revenue growth, reiterated its full-year revenue guidance and increased its margin projections. However, this did not meet the market’s expectations, as evidenced by the decline in share value.

Bernstein’s analyst, Mark Moerdler, noted that investors are seeking confirmation that Workday’s growth will stabilize in the mid-teens. While the company’s quarterly results were on target, further evidence is needed to assure investors of potential growth acceleration. Despite the lowered price target, Moerdler expressed continued confidence in Workday, citing the company’s robust business fundamentals, margin improvements, and the prospective benefits from advancements in artificial intelligence. InvestingPro analysis supports this view, showing a "Good" Financial Health score and noting that Workday holds more cash than debt on its balance sheet.

The revision in the price target to $325 is a result of Bernstein’s updated financial model and a shift in valuation methodology from price-to-sales (P/S) to a price-to-forward earnings (P/FE) based multiple, now standing at 28 times.

In his commentary, Moerdler reinforced his positive outlook on Workday, stating, "Given the strength of the business, margin improvement and potential upside from AI, we continue to like the story." This sentiment underscores the analyst’s belief in Workday’s ongoing value proposition despite the short-term market reaction.

In other recent news, Workday reported earnings that surpassed expectations, with revenue and operating margins exceeding forecasts. Despite this, Stifel lowered its price target for Workday from $310 to $275, citing concerns over the company’s growth in core business bookings. KeyBanc also adjusted its price target to $325, attributing the change to new inclusions in performance metrics. Meanwhile, BNP Paribas (OTC:BNPQY) Exane maintained an Outperform rating with a $280 target, expressing optimism for future growth supported by new product offerings and AI technologies.

Piper Sandler raised its price target to $255, noting a slight overperformance in subscription growth but maintaining a Neutral rating due to high stock-based compensation costs. RBC Capital Markets reiterated an Outperform rating with a $340 target, highlighting early adoption trends in AI and increased operating margin guidance. Workday’s calculated remaining performance obligations exceeded estimates, indicating potential stabilization. The company is closely monitoring macroeconomic uncertainties, particularly in the education and international markets.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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