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On Wednesday, Jefferies analyst Brent Thill maintained a Buy rating on Workday (NASDAQ:WDAY) with a price target of $350.00, emphasizing the potential for the company to improve its margin leverage. Thill noted that Workday’s target for a 30% operating margin trails behind its peers, who are achieving margins in the low 40s. He pointed to GoDaddy (NYSE:GDDY) as an example, whose shares have surged approximately 180% since the company shifted focus to bottom-line optimization at the end of the 2023 calendar year. According to InvestingPro data, Workday maintains strong financial fundamentals with a gross profit margin of 75.6% and holds more cash than debt on its balance sheet, suggesting room for margin expansion.
With Workday’s fourth-quarter earnings scheduled for March 3rd, as reported by InvestingPro, Thill indicated that the key points of interest would be the growth in calculated remaining performance obligations (cRPO) and any new information regarding revenue growth forecasts for fiscal year 2026. He highlighted that the fourth quarter of 2025 presents the easiest comparison of the year and could see a boost from two strategic deals that were not accounted for in the third-quarter backlog. The company has demonstrated solid growth momentum, with revenue increasing 16.8% over the last twelve months to $8.16 billion.
The analyst also pointed out Workday’s current valuation, which he considers attractive. The stock is trading at approximately 20 times CY26 street estimates and 22 times Jefferies’ updated free cash flow for a reduction in force (RIF), compared to its peers, which are trading at around 33 times. This valuation represents a discount of nearly 40%, reinforcing Thill’s decision to maintain a Buy rating on Workday shares. InvestingPro analysis reveals that while the company trades at high multiples across various metrics, it maintains strong financial health with an overall score of "GOOD" and has delivered a notable 25% price return over the past six months. Investors can access 12 additional exclusive ProTips and comprehensive valuation metrics through InvestingPro’s detailed research report.
In other recent news, Workday Inc . is undergoing significant restructuring, which includes a workforce reduction of around 1,750 jobs or 8.5% of its current staff. The company expects to incur charges between $230 million and $270 million related to this restructuring. Workday has also announced plans to exit certain owned office spaces as part of these changes. Despite these job cuts, the company intends to continue hiring in key strategic areas throughout the fiscal year ending January 31, 2026.
Deutsche Bank (ETR:DBKGn) analysts have upgraded Workday stock from Hold to Buy, reflecting their confidence in the company’s solid fundamentals and potential for sustained revenue growth. Conversely, Bernstein analysts have suggested a more cautious approach with Workday, advising investors to find suitable entry points for investment.
Guggenheim has also changed its stance on Workday, upgrading the stock from Sell to Neutral. This revision follows a period of adjustment for the company, with Workday’s subscription revenue growth having decelerated. However, analysts at Guggenheim believe that if Workday meets its fourth-quarter guidance, the new Annual Contract Value (ACV) growth for subscription revenues could remain flat in FY26.
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