Workday Dips Over 9% as Revenue Growth Forecasts Trimmed
Shares of Workday fell over 9% at the market open on Thursday after the company trimmed its revenue growth guidance through fiscal 2027 from 20% to 17-19% range. However, some analysts remain bullish on the stock, with their latest price targets still implying significant upside potential.
Workday Cuts Subscription Revenue Growth Outlook For Next 3 Years
Enterprise software maker Workday nosedived more than 9% on Thursday after the company cut its subscription revenue growth outlook through fiscal 2027. Shares were trading at $210.99 at the time of writing.
The drop comes a day after Workday told analysts it expects subscription revenue growth to be from 17% to 19% in the following three fiscal years, down from its previous guidance of 20%. The company’s fiscal 2024 year ends with the January quarter.
“The take-down on growth and margin expansion is disappointing, but we think new management is making the right strategic moves and that targets will prove conservative.”– TD Cowen analyst Derrick Wood told clients in a note.
The software vendor also announced several new generative artificial intelligence (AI) products, including an AI marketplace, developed to help customers find and deploy AI and machine learning (ML) solutions to boost their businesses.
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Piper Sandler Cuts Price Target on Workday Stock, But Upside Is Still There
Meanwhile, equity analysts at Piper Sandler reduced their price target on Workday stock from $288 to $275 on Thursday. Still, the new price objective implies a notable upside of around 30% compared to its current trading price. In addition, the analysts maintained their Overweight recommendation on WDAY shares.
The analysts’ move suggests that Workday’s most recent share price drop may be a market overreaction, given the company’s robust year-to-date performance and growing efforts to capitalize on the ongoing AI boom.
“We believe management’s 25% margin guide is a floor, giving them room to invest in artificial intelligence, financial, and international growth while allowing new CFO Zane Rowe to adjust to WDAY.”– Jefferies’ analyst Brent Thill wrote in his note.
Workday’s shares surged by over 25% year-to-date, outperforming the benchmark S&P 500 index, which gained around 12%. However, the index’s gains are largely driven by ‘The Magnificent Seven’ companies, which continue to thrive on the 2023 AI craze.
Do you think Workday’s stock price decline on Thursday is a short-term blip or an indicator for broader risks? Let us know in the comment below.