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On Friday, Piper Sandler showed a positive outlook on Workday stock (NASDAQ:WDAY), increasing the price target to $255 from the previous $230, while maintaining a Neutral rating on the shares. The stock, currently trading at $238.01, has seen a significant 12.8% decline over the past week. The adjustment by the analysts at Piper Sandler comes after Workday reported Q1 results that indicated a slight overperformance in subscription growth, which was 13.4%, modestly above expectations. According to InvestingPro data, 27 analysts have recently revised their earnings expectations upward for the upcoming period, suggesting growing confidence in the company’s prospects.
Piper Sandler’s analyst Brent Bracelin commented on the company’s performance, highlighting the continued moderation in growth over the past two years, with the full-year guidance set at a 12.5% increase. The company has maintained strong fundamentals, with revenue reaching $8.7 billion in the last twelve months and a healthy gross profit margin of 75.7%. Despite this subdued growth, the outlook for Q2 subscription growth is set at a midpoint of 13.5%, suggesting a potential stabilization. Bracelin noted that large contract deployments expected in the second half of the year could help boost growth rates into the fourth quarter.
The analyst also pointed out concerns regarding the external environment, which remains uncertain. Policy and tariff changes were mentioned as potential headwinds that could affect Workday’s performance, particularly within the education sector, which accounts for over 10% of sales, and in international markets, representing 25% of sales. Despite these challenges, InvestingPro analysis indicates the company maintains strong financial health with a "GOOD" overall score, holding more cash than debt on its balance sheet.
The increase in the price target to $255 is based on higher estimates that reflect better-than-anticipated results and guidance from the company. However, the firm’s stance remains Neutral due to Workday’s status as a low-teens growth company with high stock-based compensation costs, which are reported to be 19% of sales. There is also continued uncertainty about the potential for growth improvement in the next year, according to Bracelin.
Investors and market watchers will likely keep an eye on Workday’s performance in the coming quarters, especially regarding its ability to stabilize growth and manage the potential headwinds outlined by Piper Sandler.
In other recent news, Workday reported its first-quarter fiscal 2026 earnings, surpassing analysts’ expectations with an earnings per share of $2.23, compared to the forecasted $2.01. The company also exceeded revenue forecasts, reporting $2.24 billion against the expected $2.22 billion, marking a 13% year-over-year increase. Despite these positive results, Workday’s stock experienced a decline in after-hours trading. RBC Capital Markets maintained an Outperform rating on Workday, highlighting the company’s progress in artificial intelligence and its partner network momentum. Meanwhile, TD Cowen adjusted its price target for Workday from $320 to $310, maintaining a Buy rating, citing cautious spending and fewer early renewals as reasons for the adjustment. JMP Securities reiterated its Market Outperform rating with a steady price target of $315, expressing confidence in Workday’s long-term prospects despite short-term fluctuations. Workday’s management remains committed to strategic growth in AI and international markets, with a focus on expanding partnerships and enhancing its product offerings. These developments reflect Workday’s ongoing efforts to adapt and thrive in a competitive market environment.
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