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On Friday, TD Cowen adjusted its outlook on Workday shares (NASDAQ:WDAY), reducing the price target from $320.00 to $310.00. Despite this change, the firm continues to advocate a Buy rating on the enterprise management cloud solution provider. The stock has experienced a significant 12.8% decline over the past week, according to InvestingPro data, which also reveals that 27 analysts have recently revised their earnings estimates upward for the upcoming period. The adjustment comes after Workday reported quarterly results that aligned with subscription revenue and current remaining performance obligations (cRPO).
The company’s guidance for the upcoming quarter was slightly below TD Cowen’s expectations, attributed mainly to fewer early renewals. Nonetheless, Workday management has not observed any significant macroeconomic impacts on its business. InvestingPro data shows the company maintains robust financial health with a current ratio of 2.07 and more cash than debt on its balance sheet, suggesting strong operational stability. The company has demonstrated solid performance with a 14.95% revenue growth in the last twelve months. They have effectively navigated through their recent product release cycle and remain committed to their core growth strategies, which include expanding partnerships, financial services, small and medium enterprise (SME) outreach, and advancements in artificial intelligence.
TD Cowen’s analyst noted that the absence of an increase in first-quarter cRPO and a conservative second-quarter forecast suggest a climate of more cautious spending. These observations align with the firm’s pre-earnings checks. As a result, TD Cowen has slightly reduced its projections for Workday’s out-year figures.
Despite a robust rebound in Workday’s share price over the past month, there was some after-hours trading pressure observed. However, the analyst believes that Workday’s valuation remains compelling. At approximately 20 times enterprise value to calendar year 2026 estimated free cash flow (EV/CY26E FCF) after hours, the stock is attractive for a company that is expected to maintain mid-teens subscription revenue growth and continued margin expansion. According to InvestingPro analysis, Workday appears slightly undervalued based on its Fair Value model, despite trading at high earnings and EBITDA multiples. For deeper insights into Workday’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In conclusion, while TD Cowen has lowered the price target for Workday to $310, the firm upholds a positive outlook on the stock’s potential, underpinned by stable growth prospects and attractive valuations.
In other recent news, Workday, Inc. reported its first-quarter earnings for fiscal year 2026, surpassing analysts’ expectations with an earnings per share (EPS) of $2.23, compared to the projected $2.01. The company’s revenue also exceeded forecasts, reaching $2.24 billion against the anticipated $2.22 billion, marking a 13% year-over-year increase. Despite these positive results, Workday’s stock experienced a decline in after-hours trading. JMP analysts have maintained their Market Outperform rating for Workday, setting a price target of $315, reflecting confidence in the company’s long-term prospects.
However, the company’s billings for the quarter totaled $1.57 billion, which was below the consensus estimate of $1.68 billion, indicating a slowdown in growth. Subscription revenue, a key metric for Workday, grew by 13% to $2.06 billion, with AI products contributing significantly to this expansion. The company continues to focus on its strategic priorities, including AI integration and international market expansion. Workday has set a full-year subscription revenue guidance of $8.8 billion and anticipates faster growth in the latter half of the year, driven by AI product monetization and strategic investments.
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