Workday stock price target lowered to $285 at KeyBanc on growth concerns

Investing.com - KeyBanc Capital Markets has lowered its price target on Workday (NASDAQ:WDAY) to $285 from $325 while maintaining an Overweight rating on the stock. The enterprise software company, currently valued at $60.8 billion, is showing signs of being undervalued according to InvestingPro analysis.

The adjustment follows Workday’s second-quarter fiscal results, which exceeded expectations for current remaining performance obligations (cRPO), subscription revenue, and operating margin. Despite these positive results, KeyBanc cited "heightened uncertainty around near-term to mid-term growth trajectory" as the reason for the target reduction. InvestingPro data shows the company maintains strong fundamentals with a 75.6% gross profit margin and robust revenue growth of 13.9% over the last twelve months.

Workday raised its fiscal year 2026 subscription revenue guidance by $15 million, though KeyBanc noted this increase primarily stems from the company’s Paradox acquisition rather than organic growth. The financial software provider’s third-quarter cRPO growth guidance of 15.5%, which excludes the Paradox acquisition, came in slightly better than expected.

The company also increased its operating margin guidance to 29% and operating cash flow forecast to $2.85 billion, both exceeding consensus estimates of 28.7% and $2.75 billion, respectively. KeyBanc’s new price target is based on 22 times Workday’s projected fiscal year 2027 free cash flow.

KeyBanc expressed encouragement regarding Workday’s "continued focus on profitability" despite the concerns about growth that prompted the price target reduction. InvestingPro subscribers can access 12 additional key insights about Workday, including detailed financial health metrics and comprehensive valuation analysis in the Pro Research Report, helping investors make more informed decisions about this prominent software industry player.

In other recent news, Workday reported its second-quarter financial results, which slightly exceeded analyst consensus estimates for revenue, operating margin, and earnings per share. However, calculated billings fell short of expectations. The company raised its fiscal year 2026 subscription revenue guidance to $8.815 billion, marking a 14.2% year-over-year growth. Analysts from Cantor Fitzgerald, Mizuho (NYSE:MFG), and Needham maintained positive ratings on Workday, citing strong performance in subscription revenue and margins. Cantor Fitzgerald reiterated an Overweight rating with a $265 price target, while Mizuho upheld an Outperform rating with a $275 target. Needham continued its Buy rating with a $300 target, attributing the performance to early renewals. Conversely, Bernstein and Oppenheimer lowered their price targets to $304 and $270, respectively, due to unimpressive guidance and growth concerns. Oppenheimer noted the adjustment was due to "group multiples compression" rather than fundamental issues. These developments highlight mixed reactions from analysts, reflecting varied expectations for Workday’s future performance.

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