Raymond James initiates coverage on Workday stock with Market Perform rating

Investing.com - Raymond James initiated coverage on Workday (NASDAQ:WDAY) with a Market Perform rating on Friday. The company, currently trading at $216.81, sits near its 52-week low of $205.33 compared to its high of $294.

The research firm sees a balanced risk/reward profile for the company, with a slight positive skew following what it considers a positive catalyst from Workday’s September Analyst Day, which included a profitable growth framework, support from an activist investor, and a $5 billion share repurchase plan. InvestingPro data shows Workday holds more cash than debt on its balance sheet, potentially strengthening its position to execute the announced buyback program.

Raymond James views Workday’s fiscal second half 2026 outlook as largely de-risked, citing the inclusion of recent acquisitions not reflected in consensus estimates and a likely conservative profitability outlook following the company’s workforce restructuring announcement in the first half of fiscal 2026. This aligns with InvestingPro data indicating net income is expected to grow this year, with analysts forecasting EPS of $9.05 for FY2026.

The firm describes Workday as a "clear elite asset" with growing AI and platform potential, but notes shares are already trading largely in line with several back office and HCM peers after outperforming the IGV and SaaS peers by approximately 9% and 15% respectively over the last two months since its Analyst Day. Despite this recent outperformance, Workday remains undervalued according to InvestingPro’s Fair Value model, though it trades at a high P/E ratio of 100.78.

Raymond James believes Workday’s target of $15 per share in fiscal year 2028 free cash flow (implying over 20% CAGR) could support some multiple expansion, but suggests this expansion might be limited without notable outperformance on either the top or bottom line. The company already demonstrates strong cash generation, with InvestingPro showing levered free cash flow of $2.39 billion in the last twelve months and a free cash flow yield of 4%. Investors looking for deeper insights can access Workday’s comprehensive Pro Research Report, available among 1,400+ US equities covered on the platform.

In other recent news, Workday, Inc. announced its acquisition of Pipedream, an integration platform specializing in AI connectivity. This move aims to expand Workday’s enterprise AI capabilities by providing access to over 3,000 pre-built connectors to widely used business applications. Additionally, Workday completed its acquisition of Sana, an AI company focused on enterprise knowledge tools. This acquisition is intended to create a unified platform that integrates company applications and insights, scheduled to launch next year. Furthermore, Workday has introduced a new Custom AI Model Library for its Contract Intelligence Agent, featuring over 120 pre-built AI models. These models are designed to automate the analysis of contracts across various business functions, enhancing the company’s existing capabilities. Cantor Fitzgerald has reiterated its Overweight rating on Workday, with a price target of $280.00, ahead of the company’s fiscal third-quarter earnings report. The firm anticipates that Workday may exceed its top and bottom-line guidance based on positive feedback from Workday partners. These developments highlight Workday’s strategic focus on expanding its AI and integration capabilities.

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